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Most innovation takes hold slowly as companies initially try to adapt rather than change outright. However, as the forces of disruption gradually speed up, a tipping point is reached which suddenly accelerates the pace of change dramatically. Such a moment is now imminent in publishing.
“Nothing is as powerful as an idea whose time has come.”
Early predictions saw that 2017 would be the year where quality publishers realized they can’t beat Facebook, YouTube and the other digital attention giants at their own game — an advertising-driven race to the bottom of the addiction barrel.
After years of focusing on clicks and page-views, serving an advertising industry more preoccupied with making money in the short term rather than securing their own viable future, the feeling is that the pendulum is now finally swinging back towards premium models, where audiences will be asked to pay for quality content and great experiences — and will be willing to do so.
“It’s clear that the broken system is ad-driven media on the internet. It simply doesn’t serve people. In fact, it’s not designed to.”
In fact Ev Williams just announced at the Upfront Summit that Medium will be launching a consumer subscription model in the coming months, and from the initial feedback it seems there is support among users.
The tipping point
Two factors drive the change now gathering momentum in publishing.
The digital advertising industry: Frederic Filloux helped sum this one up better than I could. The failure of the digital advertising market is first and foremost responsible. In short, all indicators are flashing red. Revenue per page, per user, tolerance to ads, ad-blockers — the picture is bleak no matter what metric you look at.
Adding to this is the hijacking of distribution platforms and user data. Combined, Facebook and Google now capture roughly 75% of digital ad spending in the United States and 99% of its growth. Facebook and the other attention merchants have built their entire business around the simple premise of locking users into a data-driven feedback environment. It is an increasingly perfect reflection of the user’s self, totally shielded from content that doesn’t fit their ideas, opinions and beliefs. In the Facebook universe, one reinforces such personal cognitive barriers one click, like and emotion at a time. This mechanism is, in fact, at the very core of Facebook’s modus operandi. It’s a perfect advertising yield engine devoid of moral or ethical considerations, constantly lowering the barriers for participation. And when faced with the question, the answer to avoid media legislation discussions are always, “but, we’re just a platform”.
Facebook is like a digital hot-water bottle — instantly comforting, but ultimately without a soul.
The Subscription Economy: Publishers should thank Netflix, Amazon, Spotify and the other content players who have innovated ahead of them and shown users are indeed willing to pay for digital content. Changing consumer habits is not easy, but with examples like this around, users are slowly getting accustomed to the subscription economy. It’s likely that Google’s largest business will ultimately be your personal cloud subscription, not their advertising business. Newspaper publishers were the first to go online with content models, but in a moment of strategic madness they decided to break with their existing mixed payment and advertising model and not charge the user anything. Instead they relied entirely on advertising for their own survival.
A transition will of course take time, but going to a subscription or premium model that makes the user the customer again is an increasingly attractive alternative to simply bleeding to death slowly. Consumers readily pay a premium for brands and products that deliver great content and experiences and make them connect more with their aspirational self. That has always been rule #1 in the branding handbook.
The New York Times and ARPUs
One media brand that is increasingly choosing the subscription path is The New York Times.
“We are, in the simplest terms, a subscription-first business. Our focus on subscribers sets us apart in crucial ways from many other media organizations. We are not trying to maximize clicks and sell low-margin advertising against them. We are not trying to win a pageviews arms race. We believe that the more sound business strategy for The Times is to provide journalism so strong that several million people around the world are willing to pay for it.”
The New York Times — 2020 Report
The New York Times recently reported spectacular growth in paying readers. In the third quarter of 2016, digital subscriptions grew at the fastest pace since the launch of the pay model in 2011 — and growth then exceeded that pace during the fourth quarter, in a post-election surge. The publication now has 1.6 million digital-only subscriptions, up from one million a year ago. Digital subscribers contributed a total of $223 million in 2016 — a revenue line that simply didn’t exist six years ago.
And taking a closer look at the average revenue per user (ARPU) compared to unpaid models such as Buzzfeed, shows the importance of paying subscribers in The Times’ economics. The ARPU of a paying digital subscriber is 7x higher than the total average revenue from non-paying reader, and 140x higher than the average ARPU across all Buzzfeed’s audience.
Thanks to their journalism and platform, The New York Times digital revenue now towers above that of any news competitor. Last year, The Times brought in almost $500 million in purely digital revenue, which is far more than the digital revenues reported by any other leading publication (and more than BuzzFeed, The Guardian and The Washington Post — combined).
In fact, a more loyal subscriber base actually makes The New York Times a more attractive premium advertising proposition too.
So, where and how do you start?
Given a tipping point for quality publishing is emerging, publishers should ask themselves how to best take advantage of this opportunity. Introducing a premium model is of course the first step, but more needs to be done if the transition is to be successful. The basic learning from other subscription giants is that users don’t pay just for the content — their willingness to pay and not churn comes down to the overall value delivered.
Below are 4 key strategic areas to consider
1. From visitors to regulars:
Most publishers currently treat their customers more as visitors than regulars. They spend lots of time and effort creating high-quality content only to entice users away with a single click to some other questionable destination beyond their own control. I’m of course talking about the low-brow “recommendation” ads that are stuffed awkwardly into their high-quality site. These ads (we all know them, but no names mentioned here) that surround great-quality content invite people to click on trivial paid clickbait and leave again.
Large publishers now get paid large up-fronts for placing these modules, but the overall equation is a negative one. The true loss of brand equity and other revenue potential is often not measured very well. A great Danish expression describes this short term revenue thinking as a “peeing in your pants” strategy. At first you feel the warming benefits, but it very quickly turns cold.
2. From text to true multimedia journalism
In their past lives, our founders at Bibblio spent many years at AOL, where it was clear that video and multimedia improves user metrics significantly. It was clear from the numbers — multimedia beats pure text, and participation beats purely being the audience.
“If you fast-forward five years most of the content that people see on Facebook and are sharing on a day-to-day basis will be video.”
The New York Times has an unparalleled reputation for excellence in visual journalism and helped define multimedia storytelling for the news industry. Yet despite this excellence, not nearly enough of their content currently includes richer and more engaging video-based journalism, designed for the web of today. In their own words, too much of the daily reporting remains dominated by text, and users are still limited to only participating in the comments section.
This number ought to surpass 90% in a few years, if storytelling on publishing platforms is to not fall further behind other content options on the web. The Huffington Post has also for many years now demonstrated how influencers and thought leaders can be integrated into the platform in order to sustainably scale content and increase the overall value delivered to the end customer.
3. A better metric for success
Naturally, we need to talk about success and how it is measured. Clicks, shares, page views, bounce rate and dwell time, while all meaningful proxies, do not equal success. To a subscription-first business, simply trying to maximize any of the above metrics is misunderstood.
“The most successful and valuable stories are often not those that receive the largest number of page views, despite widespread newsroom assumptions. A story that receives 100,000 or 200,000 page views and makes readers feel as if they’re getting reporting and insight that they can’t find anywhere else is more valuable to The Times than a fun piece that goes viral and yet woos few if any new subscribers.”
The New York Times — 2020 Report
Looking at the leading content subscription companies in the world, deeper satisfaction metrics like Net Promoter Score and churn have already been brought to the forefront of all the data science work being done internally. A company like Netflix spends almost $250m USD yearly on personalization and content recommendation. One publisher that Bibblio is currently collaborating with has the simple but excellent idea of calculating a user score based on their likelihood to cancel their subscription in the next month. From this, it also quickly becomes clearer whether an article actually contributes to user satisfaction.
“The data and audience insights group, under Laura Evans, is in the latter stages of creating a more sophisticated metric than page views, one that tries to measure an article’s value to attracting and retaining subscribers. This metric seems a promising alternative to page views.”
The New York Times — 2020 Report
4. Better relationships with customers
Finally, it is important to become better at building and maintaining meaningful relationships with subscribers. At this point, many traditional publishers still only communicate with their customers when sending them their monthly bill — and maybe a few standard newsletters.
To achieve this, the publishing industry needs to study and learn from the best in the business, such as Amazon, Netflix and Spotify. That means improving customer service, increasing focus on quality recommendation and personalization, great experience across multiple devices, and so on.
“All of the above makes me believe — to my utmost regret — that traditional publishers might not take advantage of the rebound in the paid-for model. Amazon and others have been in business for more than two decades now. If the publishing industry has not been able to learn best practices from them, I don’t see it happening now.”
Board the train early
When a change takes hold or a new model arises, it is usually a very good idea to be first. Many of the YouTubers who now have millions of subscribers were, on top of being great at making content, also simply at the right place at the right time. Similarly, the first pages on Facebook, such as I Fucking Love Science, managed to grow to tens of millions of fans (before Facebook changed the algorithm) and allowed IFLS to build a media company on the back of it. Medium publications have experienced a very similar story, and it is happening again with Facebook Live.
The subscription economy and advertising fatigue are taking a real hold on the web, and is changing users preferences once more. Rather than sitting back, join publishers like The Information, who are already proving profitable. Even better, join De Correspondent and change your wording from “subscribers” to “members”. They recently announced they’ve reached 50,000 members in record time.
Don’t miss the train. There may not be another for a while.