Last year Mittmedia, Sweden’s leading local media company, set an aggressive budget for its digital revenues for 2018, in both its digital advertising and digital subscription businesses.
The reason for setting such high goals for our operations is that it is what it takes for Mittmedia to continue delivering local journalism, thereby contributing to local democracy.
And now, when we’re seeing revenue figures from the first quarter of 2018, we can conclude that the aggressiveness and hard work of transforming Mittmedias into a digital local media company is starting to pay off: Some key takeaways:
- The total local digital revenues (advertising and reader revenue combined) have increased with 40% in the first quarter 2018 compared to the same period last year.
- We’re especially seeing strong numbers in the digital ad business. For example, a 39% increase in local display advertising sales and accelerating revenue monthly.
- Revenues from the Mittmedia digital subscription business is seeing steady increase from the phenomenal period we had last year. Revenues are continuing to grow first quarter compared to same period last year, 13 percent. Total number of digital customers have grown with 88 percent from march 2017.
- At the same time, we need to be transparent on our print business. The structural and inevitable downward spiral is continuing for Mittmedia as for the media business as a whole (which of course makes the digital transformation even more important).
We’ll take a look at more numbers from the first quarter a bit later, but first let’s take a step back and look at our overall digital strategy.
Because the digital success we’re seeing now doesn’t just come by itself.
It takes a profound decision whether we really want continue to exist as a relevant local media company in a digital environment, and if we´re prepared to do what it takes.
Mittmedia took that decision some years ago.
We decided that our mission is too important for us to give up and die.
The Mittmedia concept of democracy contributing local journalism must survive. Not an easy mind set to turn, though.
For many years, we had been more and more pessimistic and numb to the idea of survival and future local presence. Ever accelerating decreases in printed businesses and a sense of not being able to turn the downward spiral.
Since 2004, the total Swedish printed press has lost almost 700 000 of its subscribers. Also, the drop has accelerated, with 50% of the loss taking place between 2013 and 2016.
What we should have done: Setting all resources to transform ourselves. But we failed hard.
The world around us, preferences and behaviors of readers were changing rapidly, but we didn’t do enough to meet the changes and develop digital journalism and products worth paying for.
In waiting for sunny skies without being prepared to do the hard work to, we lost some ground in the digital transformation. But in 2017, we started to turn it around. 2017 was the year when many of the Mittmedia regional organizations saw an increase in number of paying readers, and the digital ad sales started to turn to positive. Behind it all was the basic decision to stay alive and a clear digital strategy to back it up.
Sometimes, that decision means painful decisions and uncomfortable choices.
But again, the need for us to stay relevant and uphold our mission to deliver local journalism is to important not to make those decision and choices.
Relevant local journalism is key
Take a look at the digital map above. It’s a visualization of the Mittmedia digital readers. Every dot on the map represents a cluster of customers with a digital account in any of the Mittmedia products. Every morning all dots are red, indicating that customers have not yet been active in our products. As the day goes along, customers start interacting with our digital products (apps, sites, e-papers) and the dots turn green. As the next morning comes, all dots are set to red again, and the activation of users start all over again.
This map used on a daily basis by all Mittmedia newsrooms to drive production and distribution of local and relevant journalism and the goal each day is of course to activate 100 percent, since we know that activation of customers is the best way to build retention and loyalty.
Because in a new digital media environment, relevancy and the relation with readers and customer is everything.
We need and want our readers to use our products every day, creating a strong relation.
Not something unique or new but rather the basic principles when Mittmedia’s printed papers were founded over a hundred of years ago. But when we first went into digital, we actually set principles of relationship aside. Instead we started measuring digital success in anonymous page views, clicks, without caring to get to know the individual behind the click.
We chose to label 100 000 pageviews, referred from social media, as a success even though it represented a user base that we would never meet again, in any of our products.
Nowadays, 90 percent of all of the pageviews and interactions in the Mittmedia products consists of direct traffic.
That’s the relationship and loyalty we’re building our digital strategy on.
To do that, we need to make relevant journalism that makes a different in the everyday life of readers and customers.
Then, we may build a digital and sustainable business.
More and more readers are ready to pay for what we do
This graph might be the most important one to look at when understanding the Mittmedia digital loyalty strategy.
It shows the total number of customers using our digital products each week.
As of now they’re around 140 000 individuals, a number that has doubled since the beginning of 2017.
The majority of these customers actually has a subscription in which a printed paper is a product, showing us that there is no conflict between digital or print.
Thus, we’re taking print customers with us into a digital relationship, accelerating a healthy transformation. For customers wanting to finish a subscription on the printed paper, we need to offer attractive digital products.
When it comes to the number of digital only customers, the number is growing steadily. During 2017, it increased by 82 percent and during the first quarter of 2018 we see an increase by 13 percent. Mittmedia has now got 60397 digital only customers.
Actually, the great influx of digital only customers outweighs the loss of printed ones, actually increasing the TOTAL number of paying customers in many of the Mittmedia regions.
And that’s unique in our history.
Age differences — finding a new audience
Customer data shows that we’re steadily finding new customers, individuals that we haven’t had a relationship with before, creating a renewal of our customer base.
A sign of that renewal is the difference in age we see when comparing our two digital subscriptions.
The Plus subscription gives access to all the content behind paywall on sites and in apps
The average age of the Plus subscriber is 46 years, which is 20 years younger than the average print customer.
The Digital subscription offers all of the Plus content and adding the e-paper. Here, the average age is 61.
Also, as we can see on the chart above, the Plus subscription attracts customers in the twenties and thirties.
So, with the drive to deliver relevant content in the Plus offer, Mittmedia have actually started to succeed in getting young people to pay for local journalism.
Conversion is steady — now we need to work on churn
During the first quarter of 2018, Mittmedia gains 2000 new customers each week. We’ve set a fine working basic model to convert users to paying customers.
But even though conversion is now at steady levels, too many customers choose to cancel their digital subscriptions.
That’s why Mittmedia’s paid content focus during 2018 must aim at creating methods and routines to lower churn rates among the customer base.
Anti-churn efforts involve the entire company and is ongoing in a number of areas.
One main key to understand what best drives loyalty among our customer base is to compare customer data with interaction data.
We clearly see that the chances of retaining a paying customer grows if said customer becomes more and more active in our digital products.
The customers will be more loyal if the use the products they’re paying for.
Thus, a main goal for Mittmedia must be to activate digital customers from day to day and week to week.
One way of doing that is the personalization project, Soldr Personalization Service, that Mittmedia is working on and seeing good test results from.
Renewing the ad business — what it takes
The fact that the printed ad business is decreasing in a rapid pace is a well-known fact.
In addition to that, we now see a merciless drop in our abilities to make money on the quite blunt and ”non-relationship-based” display ad business that we for a while thought might carry us into the future.
That drop is quick and accelerating.
Swedish media companies are being exposed to a downward pressure in the digital ad business, and the trend is even more visible internationally. Large media companies like Buzzfeed, Vox, CNN and Vice are experiencing a slump in digital revenue and consequently reacting with cost cuts like layoffs (and in some cases even postponing IPO:s).
The reason for this pressure downward is spelled Facebook and Google, the duopoly taking more and more of the market total with sheer mass and better and more effective audience targeting ad products.
This pressure downwards for local regional and national media companies will most likely continue and accelerate in 2018 and onward.
Mittmedia saw this trend early on.
We understood that it had to be met with a focused and fast strategy.
Also, we realized that the strategy couldn’t be limited to relying on technical solutions alone to save the day.
Indeed, the excellent and world class ad tool and platforms that Mittmedia has implemented to renew the digital ad business models into target audience effectiveness is crucial for the revenues we’re now seeing.
Since ad tool and platform Reacher was implemented all over Mittmedia during 2017, we’re seeing accelerating growth in all of our digital ad sales (numbers below).
But the ad tech is mere a facilitator of the business renewal, not the sole savior.
To see real and sustainable effect, we need to reorient our business model away from blunt traditional display and toward accurate audience targeting that will create better effect for our clients.
And still, even if we renew models and build the proper tech to support those models, there’s still a very important part of the puzzle that we need to transform ourselves.
That piece is the Mittmedia salesforce, carrying out the renewal locally, every day.
In hundreds of sales meetings every day, the hard-working sales people of Mittmedia use tech and tools to create a new and digital relationship with clients, helping them to reach out and enhance business in a digital only environment.
This whole, the combination of tech and a digitally updated and locally rooted salesforce, is our best weapon when combating Google and Facebook.
And if the strategy of renewing our business means hard work from a number of aspects, when looking back at the first three months of 2018, we can see that the hard work is beginning to pay off.
Mittmedia’s local display ad sales are showing strong growth, 39 percent, for the first quarter compared to the same period 2017. At the same time, average display ad sales for the Swedish media industry are going down (6,7 percent).
The reason Mittmedia is showing such strong display ad growth is that our sales force has started using ad tool Reacher. The fact that Reacher was fully implemented in Mittmedia last year drives a positive business effect not only in display ads but in the rest of the different digital channels that are sellable in Reacher.
Sliced for channel, the numbers look like this:
- Local display: +39% (compared Q1 2017)
- Local search/social: +32% (compared Q1 2017)
- Local native ads: +511% (compared Q1 2017)
When looking at the total local ad revenue, we see a growth of 22 % in the first quarter.
Also, and very important, we see an acceleration in growth monthly for local digital ad revenues.
The trend of accelerating monthly growth is continuing in April. Half way into the month, we’re already at last year’s revenue level.
Another important part of our strategy is to find enough power in digital revenues to replace printed ones. In this aspect, we have a long way to go, but the numbers from the first quarter give us a hint on the actual feasibility of this.
Some of the Mittmedia regions are on their way of replacing the loss of printed ad revenues with digital ones.
For example, region Södertälje has reached an 87 percent print-to-digital compensation, which gives us good hope for the future.
Products and tech — what we need to take Mittmedia into the future
I’m completely convinced that the digital success of Mittmedia wouldn’t have been possible without our technical solutions.
What we call the Mittmedia digital ecosystem.
Competent and highly skilled coworkers interacting with carefully chosen and developed technique are the main ingredients in the Mittmedia digital transformation seeing.
A transformation in which we’ve been investing heavily during a number of years.
Today, Mittmedia has a complete technical platform a digital ecosystem, making us able to extract value every day from content, advertising and data. Some examples:
- Data platform Soldr enables us to analyze and understand users and their content preferences and makes possible the success in the paid content business we’re now seeing.
- Data platform Soldr also enables us to build the personalization of digital content products that will greatly help creating a sustainable paid content business ahead.
- Ad platform and sales tools Reacher enables our hard-working salesforce to make possible the success in digital advertising we’re now seeing.
Our technical solutions are being built in an agile user-and-business-first-process, where we aim at developing exactly what it takes to convert digital strategy into reality.
We can only do that by having development in-house, enabling dev teams and product managers being as close to organization and business as needed to build things that drives our strategy forward.
The Mittmedia solutions have drawn attention internationally. This june, we have the chance to win three prizes at the INMA Global Media Awards in Washington DC.
So, to finish off, let’s have a look at some of the challenges we’re facing when pushing the digital strategy onward to be able to continue being a part of the everyday life of the people and local communities.
The first three months of 2018 has been a digital success, but there are no given guarantees for success in our business. It can only be continued if we maintain a very high pace in developing content, business and technical solutions.
One of the most important factors ahead is how we manage to handle the steady decrease in revenues from the printed papers. Again, the drop in print subscriptions and revenue is structural. We need to refrain from doing things that are accelerating the structural print loss.
On the other hand, we can’t divert too much resources to try to stop an inevitable print drop. That would cripple our possibilities push toward a necessary digital transformation strategy.
Our printed newspapers are still attractive products for a loyal and loving group of customers. We want those customers to be able to maintain a printed subscription as long as there is a demand. To do so, we need to work on costs, of which printing and distribution are the main ones. Unfortunately, these costs are pretty inflexible, not going down when revenues are dropping. So, we need to solve the conflict of revenues going down but costs not doing so to be able to continue delivering printed papers.
One way of trying to do that is to switch from early morning distribution to day time distribution (by way of standard mail service) of the paper Örnsköldsviks Allehanda, based in the north of Sweden. In doing so we’re creating flexibility in distribution so that when a subscription ends, the cost will go down accordingly. If the end result in Örnsköldsvik will be in line of what we’ve calculated, we’ll take the lessons learned and scale it to other printed Mittmedia papers.
Success in transforming print businesses into more cost flexible models will be of huge help to the digital transformation.
In the future, Mittmedia will be a digital only media company, leaving the legacy of printed papers behind while at the same time maintaining our ability to carry out on our mission.
Last summer, I sat down with my colleagues in the Mittmedia management team to work on what we call ”Scenario X”. The mission was to calculate the total amount of digital only revenues that we need to be able to continue delivering local quality journalism.
Our conclusion: A digital only Mittmedia with continued strong presence in the everyday life of local people and communities isn’t only theoretically possible in, but also very feasible if we continue to push forward in digital transformation.
The numbers of the first quarter of 2018 are clear evidence.
If everything goes according to plan we’ll step out of this year with total digital revenues of 232 million Swedish kronor.
Which is actually already a third of the level of revenues we need for a completely digital company given our journalistic mission.
In other words, we’re are building a solid digital foundation for our business, a foundation that will take us in to the future.
Per Bowallius is the CEO of Mittmedia — Sweden’s leading local media publisher. He can be reached at email@example.com