How best to handle ad-blocking subscribers: Raise prices
Highly engaged readers should pay more for a better experience
People who block ads online aren’t pariahs. They’re teachers, engineers, analysts, psychologists — and me.
Yep, even though I’m a reporter for The Associated Press and indirectly live off the revenue of advertising, I use an ad blocker in my browser.
I find many online ads to be annoying, jarring, eerie, creepy and terrible. So I don’t feel bad about not seeing them.
But I also don’t like depriving myself and my fellow journalists of a living. That’s why, out of a sense of duty, I embarked on a Stanford fellowship two years ago to try to see if ad-blocking visitors could be motivated to pay for journalism.
What I’m about to write might not be so popular with my ad-blocking brethren:
Publishers that require payment for their online content should raise subscription prices on the ad-blocking visitors, including me.
It’s simple. This group, my group, puts a burden — albeit a small one — on the business model of journalism by avoiding ads that make publishers money. And we reap a benefit that other users don’t always get: faster-loading pages and cleaner news experiences.
I am personally ready to put my money where my mouth is.
Many ad-blocking subscribers say they’re willing to pay more, too.
I feel confident making this recommendation after a six-month project with Bay Area News Group, with the support of The Associated Press and a grant by the Jim Bettinger News Innovation Fund of the John S. Knight Journalism Fellowships out of Stanford.
Here’s how much:
$1 to $2 a month.
Now, in a previous post, I argued that allowing people to leave their ad blockers on is worth more than the cost of the lost ad revenue IF they subscribe. And that is certainly true, especially when a monthly subscription costs around $10 for a lot of publishers. The lost ad revenue is just $1 to $2 a month on average.
But rewarding this behavior isn’t great for publishers. This group also gets more value from a subscription because they read a lot more.
How do I know this? I tracked those detected running an ad blocker, who also clicked to subscribe on the message shown to ad blockers AND logged in to keep reading.
At BANG, this turned out to be around 330 people from March through May. These people chose to pay but didn’t want the ads.
That’s about 9 percent of people who signed up online for a subscription to The Mercury News or East Bay Times over this period.
I compared the ad-blocking subscribers to the 36,000+ people who weren’t blocking ads but also logged in for access. This latter group consists of other new digital subscribers plus a lot of legacy print subscribers.
Some interesting differences emerged:
- Ad-blocking subscribers were more than twice as engaged as other logged-in users. Remember, they were told they can leave their ad blockers on, as I described here, so they experienced less friction getting to the good stuff. On average, each user had 45 sessions over three months, more than four times the 11 sessions per user of the bigger group (a session is an uninterrupted website visit). However, they saw roughly 2.5 pages per session, instead of 4.2 pages per session of the other group. In total, they saw more than twice as many pages as other subscribers, which any digital subscription expert will tell you is a good sign they’ll stick around longer. (It turns out that’s not exactly the case, but I’ll get to that below.)
- The main group of logged-in visitors generated about 43 cents per user per month in ad revenue. Tack on the 40 percent adjustment for tracking irregularities (which I also discussed in an earlier post), and that’s still just 60 cents a month. Or, even triple it to account for seasonal variability, and that’s still under $2 a month.
- In the period I tracked, BANG lost about $1,000 in ad revenue to the ad-blocking subscribers. Small potatoes, perhaps, but not when you consider the hundreds of millions of ad-blocking surfers around the world who might pay for journalism.
BANG’s ad-blocking subscribers also paid about $7,500 over this period in subscription fees (I used the average monthly subscription revenue of all subscribers, $7.60, and applied it to this group).
Even so, many said they would pay more for ad-free access if they had to.
Half of the 20 who responded to our survey in February and March said they’d be willing to pay $1 or more per month; 35 percent said $2 or more was OK.
Over a company as large as Digital First Media, owner of Bay Area News Group, this small ask could generate many tens of thousands of dollars per year. That could be millions of dollars across all of journalism.
By charging $1 extra per month, BANG would have made up all the lost ad revenue on the ad-blocking subscribers. The fee wouldn’t fully recoup the losses on 26 percent (the heaviest users), but it would more than cover losses on the other 74 percent, according to my analysis. This is just like a gym membership — a gym might lose money serving the fitness enthusiast but it makes a profit on people who rarely show up.
This suggestion is also engineering-lite. Just raise the price on subscription offers shown to ad-blocking visitors. Don’t change anything else. Ad-blocking visitors cannot see the “regular” offer of $10 a month without first turning off their ad blocker.
It’s not a new service, per se, but it does allow visitors to bring an ad blocker to the party.
Think of it as a digital corkage fee, just like restaurants charge customers for bringing their own wine.
Now some caveats and errata:
- Ad-blocking subscribers are churning at slightly higher rates than other subscribers. About 19.5 percent of the ad-blocking subscribers quit since Feb. 4 when the ad-blocking message first went up, compared to just 12.2 percent of people who subscribed through the regular paywall. Both groups of quitters, on average, ended right around 30 days when the full $10 monthly charge kicked in. My guess as to why they were more flighty: ad-blocking visitors had less of a chance to try out the product, because they were forced to pay or give up their ad blocker on the first page view. Other visitors didn’t have to decide until a few pages later, or after subsequent months of running out of free views.
- It’s unclear how many people white-listed. It’s tough to track an event that happens off the page, like when people turn off ad blockers. People also sometimes turn their ad blockers back on and new people are installing ad blockers all the time. Over the tracking period, the detectable ad-blocking rate did not significantly change. It was about 3.27 percent in February vs. 3.24 percent in May. (We suspect we’re missing way more ad blockers than we’re detecting.)
- Changes we made to the message seen by ad-blocking visitors were insignificant. The takeaway could be that the window dressing around a message to ad-blocking visitors doesn’t matter. We changed the color to red and there wasn’t a statistically significant impact. Then we changed the wording to tell readers more explicitly they could leave their ad blockers on. No significant change.
(Here’s the previous message:)
(And the current one:)
During the final change, we also broke one of the rules of testing by changing two things at once. Alongside the wording change in mid-May, BANG extended its $1 trial offer period to three months from one month, i.e. cutting the three-month price from $21 to $1. That boosted daily subscriptions a lot, an impact that is tough to unravel.
Finally, one last point: Raising prices on ad-blocking subscribers needs to be tested. Higher net revenue is the goal and if the price hike decreases daily signups too much, it’s not worth it. I don’t recommend retroactively raising prices on people who already signed up — I think loyal customers who’ve hung around deserve to be treated well.
To be sure, there are other big issues to deal with when managing digital subscriptions — like making sure logged-in subscribers get the access they pay for (we found in an exit survey in April that 29 percent of the 40 cancelers who responded to our survey quit because of access issues); figuring out what content works to drive subscriptions and doing more of it; and creating more touch points in the community through public forums and social media channels.
Consistent efforts at improving the experience — from making it easier to subscribe, to easing the headache of logging in, to making what ads are running less intrusive — should also pay off in the long-run.
The solution I’m recommending only goes so far. The mass media business is still a scale game, and news organizations need to make their product better so they reach more people and convince more readers to pay.
And although my grant project now comes to a close, this game is far from over. The industry has a long way to go to find the sweet spot with audiences, charge them the right amount, produce journalism that meets our highest ideals, and provide a living to journalists like me.
Ryan Nakashima is a grantee of the Jim Bettinger News Innovation Fund and was a JSK Fellow at Stanford in the class of 2016–2017. He is also a technology writer at The Associated Press based in San Francisco. He lives in Menlo Park, California with his wife and three kids.