Last week I went to a “brown bag lunch” session organized by Daily Lit featuring Gail Glickman Horwood, head of digital strategy for Martha Stewart Living and a veteran of nearly 15 years in the web business for magazines and for AOL. Gail was an engaging and knowledgeable presenter and she stressed two points, one that will be familiar to readers of this blog and another that we will explore a bit further today.

The familiar one is “vertical.” Among Gail’s examples were that Martha Stewart has found a real nugget in “cupcakes” which is, literally, a slice of a slice of what the overall brand connotes. But she cited some eye-popping numbers (which I didn’t write down and have already forgotten) for the page views they got with cupcake features on their site. And Martha Stewart’s web operations reflect the understanding that even her very focused brand covers multiple niches: they separate gardening from cooking from fitness.

The less familiar one is that “everybody is a publisher.” Gail brought it up in the context of “know your competition.” This is a variation of our suggestion that you must “know your web world”. But the point Gail wanted to make is that competition is “not who you think it is.” It is, she made clear, every web site and every blogger who is talking to the same audience you are about the same subjects you are.

This is at the heart of the publisher’s challenge today. It used to be that meaningful competition could come only from somebody with roughly equivalent capital resources: the ability to publish “at scale.” This is no longer the case. A hundred different bloggers can each be peeling away small fractions of the audience but the cumulative impact is extremely corrosive and, for the publication that relies on critical mass to support scale it can be devastating.

But could what is so threatening today be tomorrow’s opportunity for publishers?

At the heart of Horwood’s presentation and a key to my “shift” argument is that the “act” of publishing — putting content out in a way that anybody can gain access to it — has become trivially simple and cheap. So for any subject, including cupcakes, the amount of “published” material available has exploded. The content is no longer scarce. And while the well-funded legacy publisher with a brand and an audience still has significant advantages, it also has significant overheads.

But let’s look at the problem from the non-traditional publisher’s point of view. Some of these, and the ones that Horwood has focused on, are, essentially, content creators without a publishing business model. Bloggers (like me) write because they have something to say and are willing to build a non-paying audience by saying it. In my case, the blogging fits into a larger business strategy of brand-building that is rewarded with consulting and speaking assignments.

But think about the “publishers” who are not content creators? Who are they? Every brand purveying a product or a service that is not about content creation! Every bank, every insurance company, every manufacturer, every retailer, every accounting or architecture firm, every contractor, every lawyer has a web site. Brands are learning that they should have Facebook pages and Twitter accounts.

But they don’t know anything about content creation, content monetization, or rights. Big companies can be spending many millions a year acting as publishers without knowing these things. That’s the opportunity for today’s experienced publishers.

Exploiting this opportunity depends entirely on vertical content: depth of content intended for a coherent community. The architecture firm, contractor, and lawyer need focused content. Meanwhile, the major publishers continue to focus their attention on horizontal development. The latest example is Penguin’s new web initiative announced today. There is a lot to compliment them on, especially being willing to experiment with new content in new formats. There are things to complain about such as the rendering of really cool technology they have for showing the books, which they got from Issuu. It looks great but on my laptop and my browser (Chrome) the type was a bit uncomfortably small and there was no obvious way to enlarge it.

The main shortcoming of the initiative, from this seat, is that it does nothing to move a horizontal house toward verticality.

Horwood, in her talk, made it clear that non-publishers are frequently asking the Martha Stewart organization for content. Her response to that is cautious, perhaps excessively so from our perspective. But the central point is that the potential for partnership between content-creating legacy publishers and the new crop of web publishers who don’t know about content-creation is an emerging opportunity. Publishers with a depth of content in verticals will be able to benefit; those without it will not.

In the next few years, we are going to see massive reshuffling of the portfolios of copyrights held by the biggest houses when the inevitability of verticals become clear. What’s probably going to happen is that the biggest general trade houses will become sellers and the niche players like Martha Stewart and many others will be the buyers, taking what look like the least attractive and least profitable IP off the majors’ hands. Since the biggest houses will have to shrink, this will look like an opportunity to turn lead weights into gold bars.

But just as department stores found that the business model doesn’t work if all they sell is ready-to-wear, big publishers are going to find that most of them can’t live on fiction and celebrity bios alone. The books that sell most of their copies to horizontal (i.e. mass) audiences through horizontal channels (i.e. general bookstores) are the ones with the least potential for secondary revenue generation in the emerging vertical world. They are the ones that are hardest to convert to loyal niche audiences. We’ll need a big publisher to handle that business, but pretty soon we’ll find we can get along with a lot fewer than six.

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