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FIPP’s recently published Innovation in Media 2019-2020 World Report delves into the different business models that publishers are using worldwide to drive revenue. It covers 13 business models ranging from Reader revenue (subscriptions) and Ad dependent, to IT provider and Investor.
Here we share highlights from the report on how the business looks for publishers reliant on subscriptions, advertising and selling data as a service (DaaS).
Subscriptions: “Morphing beyond its original form”
FIPP’s Global Digital Subscription Snapshot recorded a doubling of digital-only subscriptions from 10M to 20M, between 2018 and 2019. It trumped Deloitte’s prediction that digital-only subscribers to news and magazine media globally would reach 20M by the end of 2020.
Not only is subscription revenue growing. It is also morphing beyond its original form to include greatly expanded niche vertical subscriptions, profitable enterprise B2B sales, conversions to high-end product subscriptions, and, most importantly, whole departments dedicated to retention.
John Wilpers, Author, FIPP’s Innovation in Media 2019-2020 World Report
Publishers are using multiple strategies to drive subscriptions. These include newsletters, niche topic coverage (politics, business, food), personalized subscription pitches, and targeting affinity groups on Facebook and Google with paid posts and paid search keywords. The last one helps get content in front of potentially new audiences.
Readers are also increasingly being asked to register to access content. More publishers are opting for personalized paywalls that tailor access to content based on user behavior. According to subscription solutions provider Piano’s research, the average conversion rate of registered users is 10x that of anonymous visitors.
There is also an increased focus on retention. The Washington Post did not have anyone dedicated to retention till late 2016. Today, it has 25 people working on it. Similarly, The New York Times tripled its retention focused staff between 2015 and 2017.
You don’t get money from conversion, it’s from retention.
Kjersti Thorneus, Director of Product Management, Schibsted Media Group
Niche paid verticals present a lucrative opportunity. Investor’s Business Daily offers eight different products, each designed with a different investor persona in mind and priced accordingly: Leaderboard costs $69.99 per month, while MarketSmith costs upwards of $1,400 per year. Currently, subscriptions account for 80% of IBD’s revenues, up from 50% in 2015.
Launching a new subscription vertical product is accompanied by the fear of cannibalization. The argument is, will readers who were paying for the entire product, downgrade to only pay for the subscription vertical content?
“The counter argument is that the alternative is actually churning entirely. If a subscriber is looking to downgrade their subscription, isn’t it better to at least retain them as a subscriber with the vertical than to lose them as a subscriber completely,” according to Folio.
Advertising: “The challenge is how to get your share”
That’s a dilemma a large chunk of publishers may not be facing. “Despite all the noise with the pivot to paid, subscriptions aren’t a source of revenue for an incredible 40% of publishers,” writes Wilpers, quoting research by Digiday.
In the US, advertisers increased spending on digital formats by 17% during the first half of 2019. That’s a net increase of more than $8B. And it has far outpaced total advertising growth rates of approximately 5%.
Internet advertising is set to exceed 50% of the ad market, for the first time, in 2021, according to the FIPP’s Advertising Expenditure Forecasts.
Digital advertising is still a growth industry. With the ability to offer compelling content, brand safety, and high-end audiences, savvy publishers are well positioned to be prosperous in 2020.
Tim Bourgeois, Digital Media Auditor and Consultant
Direct-sold and programmatic ads are the brightest spots for publishers’ online revenues, according to a Digiday report. 50% of publishers reported that direct-sold advertising was a large, or very large source of revenue for them. Programmatic ads are also another major source, according to 36% of publishers.
In a different survey of 135 publishers conducted by Digiday Research in autumn of 2019, over 65% of respondents said building direct sold ads was a major focus for them over the next six months. Other major priorities included programmatic ads (nearly 60%).
Programmatic advertising has reached unprecedented adoption in recent years as the industry responds to changing marketplace dynamics.
Taylor Peterson, Deputy Editor at Third Door Media
“For all the doom and gloom about advertising, it nonetheless remains a growth area. The challenge is how to get your share,” comments Wilpers.
Jessica Rovello, CEO of content company, Arkadium, said that media companies need to fix the broken online advertising model.
“The ‘downward spiral’ of the current system is caused by poor digital ad formats that lead to ad blocking, reduction in revenue, more ads per page, and ultimately an awful user experience,” he explained.
“To counter this, better engaging, less intrusive digital adverts will lead to an upward spiral, which will decrease ad blocking, increase revenue, lead to less, but more relevant ads per page and create a better user experience.”
Data: “The biggest opportunity in the market today”
Many publishers are also using the rich behavioural, subscriber, and social data they own to drive ad revenues. They are offering AI-driven data insights to their advertising and marketing partners and clients.
The New York Times launched an AI driven tool called Readerscope, a few years ago. It summarises what segments of The Times its audience is reading, visualising who is interested in which topics and where they are. The tool is used for content strategy, as well as, to help advertisers and marketers understand their desired audiences better.
The Washington Post has developed a first-party data ad targeting tool called Zeus Insights. It offers detailed contextual targeting capabilities along with user-intent predictions for marketers. The idea is to give marketers a sophisticated ad targeting tool that does not depend on third-party cookies and yet drives results. Arc reaches 750M unique users globally.
“Selling data-as-a-service (DaaS) has proven to be very lucrative for some companies,” writes Wilpers. “Its success has fulfilled the prophecy of Prescott Shibles, Senior VP/Data of advertising firm Randall-Reilly, who said “targeting data will soon be worth more than advertising inventory.”
“Publishers who want to not only compete but also thrive in today’s media market need to look at what they already have in their back pocket,” said Fred Marthoz, Managing Director at data solutions company Lotame.
We often talk about the pivot to video or the pivot to podcasts. The pivot to data is really the biggest opportunity in the market today.
Fred Marthoz, Managing Director, Lotame
First-party data can provide valuable insights into other business models being used by publishers today. These include memberships, events, and branded content among others.
The Innovation in Media 2019-2020 World Report offers a deep dive into the above and other business models that have proven to be effective in driving publishers’ revenues.
The report is available for download from FIPP:
Innovation in Media 2019-2020 World Report
FIPP is organizing a free webinar on Thursday, 16th of April. It will be hosted by FIPP President and CEO, James Hewes, and will have John Wilpers talking about key innovations included in the report. He will also touch upon how they may help overcome the current and short-term industry challenges.
Some of the topics to be covered include recruiting and retaining talent, innovative monetization models, how to get creative, what makes for good journalism, and more.
Here’s the link to the webinar: https://zoom.us/webinar/register/9515859171174/WN_wdqPWBDPT0euug_P41i5sg
It takes place on 16 April 2020, at:
- 9 AM Eastern Time
- 2 PM British Summer Time
- 3 PM Central European Time
- 6:30 PM Indian Standard Time
