2023 promises to be a year of rapid change, disruption, and opportunity. Pepe Cerezo, one of Spain’s and Latin America’s leading publishing consultants, explains how publishers need to embrace the shifting sands and harness the clear opportunities at a time of great uncertainty.
At the beginning of each new year, there is a widespread feeling that the forthcoming year will be more important and relevant than the previous one for the media industry – changes in users’ consumption habits, new disruptive technologies, the rise of new players… a scenario of constant movement and change.
In this context with countless unknowns to be resolved, the only certainty is that this is the year of uncertainty.
The pandemic boosted subscription models, giving value to quality journalism, and providing fresh hope for an industry affected by digital disruption and the successive crises of the last two decades. But, as the health effects of Covid-19 were being left behind, the crisis caused by the war in Ukraine had a profound impact on the sector.
We know that the habits of readers and media economic models are closely intertwined. Any external change that modifies readers’ habits alters the unstable revenue balance of the online news industry. So it almost feels like we’re back to the great crisis of the middle of the last decade.
Faced with this inflationary economic crisis, the media has entered a battle to sustain the number of subscribers it achieved in previous years. As the subscription market matures, and as growth slows, publishers have to develop more aggressive strategies to convert the remaining less loyal readers. It is, in short, a risky gamble, because if offers are too aggressive, uptake may improve but overall revenues will quickly suffer.
While offers based on price reductions have an almost immediate effect in getting new readers to subscribe and in retention, insofar as they allow renewals to be maintained, in the medium term they can also have a negative impact by reducing Lifetime Value (LTV).
Faced with this dilemma, in which there may be an increase in the number of subscribers but lower profitability, it is necessary to look for other options that can help maintain or increase the number of new subscribers, while increasing total revenues. Thus, the most innovative media in terms of business development are betting on new strategies such as bundling offers (bundles) either between products and services of the same brand or between different companies.
Traditionally, the most common model of “bundles” is usually the integration of services offered by complementary companies. In the case of incremental packages, we are witnessing the aggregation of services of complementary brands that join forces to increase the value proposition in a joint way. The new strategies, still in a somewhat experimental phase, will see offers of smaller and more economical thematic packages, consisting of subscriptions to sections, by authors, etc.
In these package offers, the media will also have to explore the possibilities of B2B (business to business) and B2P (business to professional) offers, a market that has been little explored as a whole and which, in principle, opens up the opportunity to reach new audiences.
From cookieless to addressability
If subscriptions present uncertainties, the advertising market, given what has happened over the past year, looks like a roller coaster ride in 2023. Although we are only a few days into this new year, the uncertainty of the environment means that planning is becoming more tactical and less strategic, with few options for medium- or long-term actions.
Uncertainty looms over some of the trends seen at the start of 2022. The more advanced media with robust subscription models were betting on drastically reducing inventory in order to generate more qualified advertising space. This is not expected to change for those media that had optimized their inventory, but the change in the economic context has meant that this practice has not become widespread and many media continue to bet on massive, highly intrusive and inefficient advertising,
On the other hand, the successive delays in the announced disappearance of third-party cookies, and the fact that a global solution has not been consolidated as an alternative, adds fuel to the fire of uncertainty. It is still thought that for those publishers that are able to value their first-party data, the death of cookies should be seen as an opportunity to generate new sources of revenue and regain the trust of their readers, but we move more in the field of speculation than certainty.
As opposed to the hackneyed concept of cookie-less, we are increasingly talking about addressability. Many solutions are being presented as substitute technologies for cookies – also known as IDs. These new identifiers should allow targeted advertising and measurement to be maintained like cookies but also meet the demand for greater protection of user privacy. Although there is no single winning solution, and there may never be one, during 2023 a concentration in the number of companies offering identifiers and identity solutions is more than probable.
However, the large tech platforms do not appear to be in favor of promoting IDs and this could hinder their consolidation as a global solution. As an alternative and in parallel to the boom and expected consolidation of ID solutions, other technologies and solutions are appearing. In the search for an alternative model to cookies, data clean rooms have gained relevance. Clean rooms are data sets where the multiple parties involved in the identification of users can anonymize their data without exposing users’ privacy.
I don’t think anyone dares to set a definitive date for the disappearance of cookies, but it is likely that we will witness a no-holds-barred war between platforms and technological solutions to consolidate an alternative for the entire advertising ecosystem. As we have seen on previous occasions, the control of the market through the creation of a global standard is no joke.Pepe Cerezo
If you don’t have a retail media strategy, you’re running late
The publishing industry should be thinking about its role within the new retail media ecosystem, where retail ecommerce and advertising converge. Simply put, it is when retailers engage in marketing advertising space on their sites enriched with their customers’ purchase data.
It is a relatively new market, barely ten years old, but with significant exponential growth. According to predictions by eMarketer analysts, retail media will be the third wave of online advertising, behind search engine-driven and social media. Retail media ad spending in the U.S. could exceed 19% by 2023.
Given this promising scenario for retailers, inevitable questions arise: how will publishers fit into this new advertising market, will it represent an opportunity or will it be a new train passing by, will it help revenue diversification or, on the contrary, will the new players cannibalize part of the current advertising pie? Against this backdrop, the media have to start positioning themselves during 2023 if they want to become a relevant player.
Revenue managers gain more power
The coexistence of the two main revenue models, advertising and subscriptions, is consolidating the position of the Chief Revenue Officer (CRO) within media organizations. CROs have become a key player within media companies during these turbulent times. Although the position has existed for some time, its role has evolved rapidly due to changes in the industry, first with the advent of subscription models, then with the pandemic and more recently with the current global market crisis. Initially, CRO’s were almost exclusively focused on commercial operations.
There needs to be a focus on diversifying revenue streams that can ultimately drive and feed off each other like a domino effect – a solid business of registrations and subscribers creates qualified data that can optimize the advertising business, which enhances the organization and marketing of events, which in turn consolidates the e-commerce or the affiliate models, etc. The CRO’s mission will be to offer a comprehensive vision and establish an integrated strategy for all revenue streams. A major challenge for 2023
It would be unfocused to talk about the Metaverse, AI, Blockchain, etc, but no media outlet can turn its back on the fact that a new wave of disruptive technologies is knocking at the door and will soon transform the information and entertainment business. In addition to the already complex situation of the current media market, facing this very complex future environment undoubtedly increases the feeling of vertigo, but you have to get used to it, it is the era of uncertainty!
Pepe Cerezo is a digital monetization consultant specializing in digital journalism, online media, and new business models. He is a leading consultant for some of the biggest publishers in Spain and Latin America, and currently collaborates with Blue Engine Collaborative, a consortium of advisors focused on driving digital audience growth and revenue. He also works as an advisor to WAN-IFRA’s Table Stakes Europe program on the digital transformation of newsrooms.