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April 4, 2018, noon
Business Models

Coconuts, a fast-growing, cities-focused network of sites in Asia, takes a hard right into paid memberships

“The main point is that all of these changes have made me realize that you can’t build a business off Facebook, and the only constant is that Facebook is going to be constantly changing.”

Coconuts, born as a network of city-focused sites centered around English-language audiences in Southeast Asia, has now been around for seven years. Its content, often irreverent, often derived from trending topics on social media, makes for a fun read, and that’s how it’s built its name.

The network of sites started out as an English-language city guide for Bangkok, but has now expanded across multiple cities in Asia, including Bali, Hong Kong, Jakarta, Kuala Lumpur, Manila, Singapore, and Yangon, covering entertainment, lifestyle, travel, and general news focused on life in those cities (think the Gothamist model, at least before some of them were adopted by a coalition of public radio institutions.)

Coconuts claims about two million monthly unique visitors on its sites across Asia — when you include on top of that its audience duplicated across the various social media and video platforms it publishes on, that number is around 10 million.

But Coconuts founder Byron Perry now says he’s done with a market that he feels is mired in clickbait and hangs too heavily on Facebook’s algorithms. Earlier in March, Coconuts told its readers that it would instead start focusing on a quality, engaged audience through a paid membership plan, Coco+ ($5 USD per month; an introductory offer of $29.99 for a year). Readers will hit a paywall after 15 stories. From the announcement:

By becoming a paid COCO+ Member, you will be contributing to better Coconuts content, including:
— More originally reported News stories.
— More in-depth and investigative Feature stories.
— More Food & Drink and Lifestyle coverage.
— More Coconuts TV videos.
— More travel stories, published in our new Coco Travel section.
— A better Coconuts iOS and Android app…coming very soon.

Despite all this lofty talk — don’t worry! — we’re never going to stop writing about grannies who do yoga or naked dudes masturbating on unicycles. Telling these nutty stories is part of our DNA, and we believe there is room for both the profane and the profound in our digital pages.

This interview with Perry has been edited lightly for flow and clarity.

Alan Soon: When we first met some years back, you were looking to bring the business out here to Singapore from Bangkok and grow it across other countries. How’s that expansion going?

Byron Perry: We’re in seven countries and cities. We launched Bangkok first, then Manila, Singapore, Hong Kong, Kuala Lumpur, Jakarta, and Bali. The last new place that we launched was Yangon in 2015. It’s a question of resources. If we had unlimited resources I would like to launch in other places.

But the thing that I realized was that when you launch a new market you’re starting at the bottom. If advertising is your number one revenue model, you really need to get to the top or near the top.

With our current resources we can’t handle launching in several new cities, and I don’t think that would be a good strategy. It’s hard walking into a new market and building audience from scratch.

Soon: How many people do you have now on staff?

Perry: We have about 40. We’re looking to hire a few key people right now. We’re looking to hire a food, lifestyle, and travel editor because that’s a really key aspect of our coverage that can be improved — we’re focusing less on virality. We’re also looking to hire a senior producer to deal with all our video productions, especially with the broadcast TV stuff.

Soon: How much of your audience strategy has changed because of the way Facebook evolved its algorithm? It’s harder for you to build a mass audience now, isn’t it?

Perry: Facebook has always been the most important platform besides our website for driving traffic. A lot of people only check out our Facebook feed without coming to our platform.

The peak of Facebook driving traffic was around 2015 to 2016. Referrals have never been more than 50 percent — it’s more like 35 percent now, so it’s decreased. After the peak of 2016, they launched video features, they prioritized videos. Then it was Instant Articles, so Facebook was no longer driving traffic to the website.

But even with the changes to Facebook announced in January, we haven’t seen a drastic drop. In fact, traffic has gone up. That could be temporary.

The main point is that all of these changes have made me realize that you can’t build a business off Facebook, and the only constant is that Facebook is going to be constantly changing. So you can’t set in place a strategy that has much permanence, because everything is always going to change on Facebook.

Soon: But you’ve been able to ride those changes as well. When they did videos, you did videos. And now, you’re on Netflix.

Perry: Video is great. We started video in 2013. We started as a YouTube channel — it wasn’t video on Facebook. YouTube was the destination for video, and it was embedded throughout most websites. Then Facebook got going, so we tried creating shorter videos for Facebook.

We followed some of the trends, and then got fed up and decided to focus on what we really wanted to do. What we think has value is longer form, higher quality stuff, totally originally produced. It may be released on Facebook and YouTube first, but we want to build off that audience to try and get deals to create videos for Netflix, iFlix, broadcast and OTTs.

Soon: Where are you on that journey with regard to revenue? Is the monetization now coming from videos, or ads on article pages?

Perry: It’s diversified, which is good. The way I split it up is by advertising, and by licensing and production.

So licensing is like with Netflix. We license them our videos. With iFlix, they commissioned that so they own it. So that’s a production. We’re really just producing that for them, but actually it’s a lot more than that because it has our Coconuts TV name on it.

So that is 70-30 in the last year. 70 percent was advertising and 30 percent was licensing and production. I want to grow the licensing production to be a higher percentage. The new membership and subscription initiative would be the third pillar.

We don’t want advertising to be 70 percent. Definitely not 100 percent. We want advertising to be a third.

Soon: So tell me about Coco+, your subscription plan. Fifteen free articles each month seems generous. How did you arrive at that number?

Perry: It was a huge decision and it took a fairly long time. I’ve been thinking about this since November. It could go both ways. But I believe this is the way forward for publishers and that not charging something might be the original sin that publishers committed.

We were inspired by WSJ+, which is constantly giving away cool tickets, event access and prizes. So I thought, we’d do two things: unlimited content on a paywall, plus giveaways like a tote bag.

Some people just want content, some people might be excited about the benefits. Some might just want the tote bag.

We did a big survey of our readers — about 4,000 people responded last year. We asked, what are we doing right? What are we doing wrong? What would you like to see more? They all wanted giveaways — which is easy for us. Brands and advertisers are always putting these things in front of us, but we prefer they spend money with us. But yeah, we’ll give you sweet, free tickets.

In terms of the number of stories, much of the audience is never going to hit the paywall. Google Analytics says 55 percent of our audience is new. But we didn’t want to put it too low because people would hit the paywall and get pissed. So we wanted to give it some leeway. But we totally reserve the right to and probably will decrease the number in the future.

Soon: What do you think Coconuts could look like a year or two years from now?

Perry: I call us an online publisher or a media company. I think that what we do is we create great content, and that’s not going to change.

I just hope that in two years, we’re profitable. We’re looking to become profitable this year and we have this diversified business that has revenue streams from those three main sources — advertising, licensing and production, and a growing membership — so we’re not chasing the whims of Facebook’s algorithm or anything else.

A version of this interview was first published in Splice Newsroom.

Portrait of Byron Perry by Alan Soon and Rishad Patel. Photograph of the Coconuts Bangkok office provided by Coconuts.

POSTED     April 4, 2018, noon
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