Jeff Bezos bought the Washington Post at a time when the print media industry faces recurring revenue shortfalls. With this deal, Bezos has set a target for Washington Post’s 1 year old service, Arc Publishing, of $100 million.
In a significant boost to Jeff Bezos’s wealth, Amazon’s enterprising CEO scored a double win this week when he signed Washington Post’s, the newspaper company that he acquired in 2013, biggest contract to date, to sell web publishing tools that are mostly hosted by Amazon.com Inc.
The deal is a win-win situation for both Bezos and the Washington Post, which was seeing a steady fall of advertising revenue from traditional media and was looking to branch off from its core new business.
Washington Post’s 1 year old service, Arc Publishing, with just about a dozen clients is chasing an annual revenue target of $100 million.
Four years ago, Bezos had bought the Washington Post for $250 million in a private deal not related to Amazon.
“Thanks LA Times for choosing WaPo’s Arc Publishing for your digital platform, and kudos to tech team at The Post!” tweeted Bezos when the deal was announced.
As you might expect, the deal indirectly benefits from Amazon Web Services (AWS), Amazon’s fastest-growing unit.
For Amazon’s AWS, Arcc represents a new business opportunity to extend its reach into the publishing world and grow into an untapped market. A big number of software companies serve both the news media and corporate clients who increasingly publish material online to directly reach clients.
Amazon’s AWS already counts the Guardian and publishers Hearst as customers.
“We will host with whatever cloud service gives us the maximum value,” said Washington Post Chief Information Officer, Shailesh Prakash.
“There’s no doubt that this could prove to be a terrific source of captive clientele for Amazon Web Services and an interesting new market for them,” said Jim Friedlich, Lenfest Institute for Journalism’s CEO who is also a former executive from the Wall Street Journal.
He went on to add, “If it succeeds, as I suspect it will, it will be a game-changer for The Washington Post”.
Significantly, analysts have pointed out that the Washington Post has taken a leaf out of Bezos’ playbook, i.e. making money out of tools originally developed for internal use, just like Amazon does for its data centres that now form the backbone of AWS.
For AWS, revenues from Arc would be pretty small, however it “is the type of thing that (helps one become) smart in a vertical, that adds skills and features, that basically attracts clients,” said Gene Munster, a veteran equity analyst who is now heads of research at Loup Ventures.
As for Washington Post’s revenue target for Arc, achieving that isn’t likely to be an easy target. In recent years, editorial technology has not been immune to the wider problems facing the print media industry, which has seen its revenues slump.
“Many brands are evolving (into) publishers including financial institutions, and all of them need modern story-telling tools,” said Prakash. Revenue “could be significantly less if we fail to grow this nascent (and technologically challenging) business.”
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