Month: May 2020

With lockdown restrictions now being eased by some governments, small green shoots of recovery are beginning to emerge. Digiday reporters took a (virtual) trip around the world to see where activity is beginning to restart.

China: Tentative recovery

Despite optimistic videos of packed shopping malls and bars in China’s reopened cities, the positive outlook for China’s ad industry recovery is still tentative. According to eMarketer, ad spending in China is currently projected to grow by 8.4% in 2020 to reach a total of $113.67 billion, down from the pre-pandemic forecast of $121.1 billion for the year.

“Every single client’s gradually picking up,” said Janet Tsai, global lead of Ogilvy’s China brand practice. While there was an acceleration in spending in the second quarter to make up for first-quarter losses, the full impact of coronavirus on the China ad industry remains unclear she said.

Growth will come almost exclusively from digital, which makes up the lion’s share of China ad spending and is predicted by eMarketer to grow 13% to $81 billion this year.

“The diversification of purchase channels and increase in screen time on social platforms like Weibo, Little Red Book and Douyin have led brands to invest on a digital-first approach,” said Tsai. 

For the majority of marketers, “the dominant response wasn’t to stop spending” altogether as a result of the pandemic, said Sarah Weyman, the chief growth officer of Dentsu Aegis Network China. A Dentsu survey of 155 marketers found that 7% of respondents had stopped all spending in March and only 2% had done so in April. But budgets are under pressure. In April, 52% said they had “significantly decreased” their marketing budget between 5 and 15%, while 62% said they did so in May.

—Liz Flora

Japan: Optimists, look elsewhere

With fewer than 800 coronavirus-related deaths, Japan’s population has not been hit hardest by the crisis. Its economy is another matter. Japan has already officially slumped into a recession, and even with retail stores and restaurants beginning to reopen, its recovery prospects are being weighed down by people’s pessimism.

In mid-March, even as countries like the U.S. began to lock down, people in Japan remained positive, said Naomi Yamakawa, a Tokyo-based partner at McKinsey. Then, in late March, Japan’s government declared a state of emergency and asked people to stay home. That same week, The Tokyo Olympics was postponed, which had a major impact on consumer sentiment.

Compounding matters, with stores closed and people at home, people in Japan are not big online shoppers like those in the U.S. or China; ecommerce only accounted for 7% of sales in 2018, according to Japan’s ministry of economy, trade and industry. 

All of that has combined to effectively negate the increased opportunity that advertisers have to reach people with TV and online video viewership up. In a survey conducted by Kantar, 42% of respondents in Japan said they are watching more TV and 37% said they are watching more videos online. 

“People are watching but not necessarily spending,” Yamakawa said.

The crisis may have accelerated the shift in ad dollars to online. Japan media giant Hakuhodo’s billings related to traditional media such as TV, radio and print publications plummeted 33% in April, but online media billings rose 9%.

— Tim Peterson

Germany: Green shoots and scores

Germany has experienced fewer coronavirus-related deaths compared to its European neighbors. Visits to German shops increased by 20% during the first week of May compared with the first week of April, according to tech company Adsquare.

Germany’s top football league, the Bundesliga, restarted May 16, marking the first major soccer back on global TV and unlocking pent up ad budgets. Despite the “bizarre, sterile and eerie” atmosphere, the matches drew record TV ratings of 6 million in Germany, more than double the usual audience for a typical round of Saturday games. The games scored record highs in the U.S. too, with Amazon Prime airing matches.

Now manufacturing plants have restarted, ad budgets are expected to flow, although complex creative ad campaigns requiring high production requiring larger teams are still on hold. Many advertisers are still cautious especially in industries that were pummeled, like travel, hospitality and automotive, said Arne Brekenfeld, chief strategy officer at Publicis Groupe, Germany, Austria and Switzerland.

Germany’s big media groups Axel Springer and Bertelsmann have suffered but are expected to able to weather the storm due to their size and diverse revenue streams, like music and education services. Video-on-demand streaming services were up 34% year-on-year to 1.5 million. 

— Lucinda Southern

Sweden: An exception

Shops and bars in Sweden never fully closed as its government took a softer approach to lockdown restrictions than others. Consumer spending still dropped by 25% in March. That’s a bit below neighboring Denmark where strict regulations were enforced, spending was down by 29% according to research by Niels Johannesen of Copenhagen University).

Nordic media giant Schibsted saw record traffic and 25% growth in digital subscription revenues. But in Sweden, ad revenue fell 26% because of coronavirus and also the impact of stricter gambling ad regulation imposed in 2019. Overall revenues for the first quarter were down 2%.

“Mid-march, we had a full stop, that is not the feeling now,” said country manager Sweden and evp of Schibsted Next, Raoul Grünthal. “It’s a weak ad market but some are buying, it’s a mixed picture but it’s not a dead market.”

While drama TV productions is on hold, commercials are flowing: 10 out of the last 15 days were shooting days, said executive producer at ad agency Chimney Group, Gustav Garhammar. TV commercials are still shot with fewer than 50 people on set, but the process has changed: Dedicated people are on set to remind staff to not get too close; creatively, frames are planned with fewer people in them; there are no older people on set; clients supervise through video conferencing links; people arrive in different vehicles; hair and make-up vans are separate.

— Lucinda Southern

Spain and France: Neighbors but worlds apart

Spain is in the midst of a four-stage plan to relax one of the strictest lockdowns in the world, while restrictions in neighboring France eased from early May.

Most advertisers in Spain believe their spending levels could return to pre-pandemic levels by the first quarter of next year, according to a spokeswoman from The Spanish Association of Advertisers. Much of the recovery will be predicated on Madrid and Barcelona, where 25% of Spain’s population lives. Cristina Barranco, md of OMD Spain, said.

“France can be a difficult market for businesses because the people here are quite skeptical and pessimistic in a collective way,” said Thomas Husson, a principal analyst at Forrester.

French TV group TF1 expects the stagnant economic situation to force advertisers to rein in spending over the second quarter after it saw revenues slide 9.7% year-on-year in the first quarter. Newspapers are also struggling not just with ad revenues but distribution too. The main press distributor Presstalis filed for bankruptcy last month. 

Seb Joseph – Digiday U.K. brands editor

Italy: Ads evoking national pride

In March, Italy overtook China as the epicenter for the coronavirus pandemic. An unexpected outgrowth: the stirring images of citizens under lockdown hanging Italian flags and singing traditional songs from their balconies. That sense of national pride looks set to be amplified by advertisers.

“The sentiment I see is very patriotic,” said Giorgio Brenna, CEO of ad agency FCB Italy. There is an “enthusiasm to restart and have a new renaissance of this country.”

Already, advertising messaging has evolved from “thank you” and “we’re all in this together” to more nuanced creative. For example, a global Ikea campaign from We Are Social Milan launched in Italy on May 17 to mark International Day Against Homophobia, Transphobia and Biphobia, relaying the message that everyone deserves to feel “at home.”

Like other countries, Italian newspapers have suffered through the crisis. On March 17, the Italian government announced a 30% tax relief on advertising investments made on news media incurred in 2020. Another green shoot: There has been a strong return to the newsstand near home, as well as a growth in sales at supermarkets — by 20% for some publishers — according to Publicis Groupe’s analysis of Audiweb Nielsen data from Feb. 1 to May. 3. Another sign of confidence in the sector during the crisis: In April, Exor, the Italian Agnelli family, completed a €102.4 million ($111.6 million) deal for a controlling stake in Italy’s largest news group GEDI, which owns the La Repubblica and La Stampa newspapers.

Overall, Italian consumer sentiment has remained steady, with most Italian consumers pessimistic or unsure about an economic recovery, according to McKinsey’s consumer pulse surveys from March through May 3. Still, household spending began to increase slightly, in May with consumers saying they expected to spend more online in areas like home entertainment, electronics and food takeout.

— Lara O’Reilly

Australia: Anticipating a sports and ecommerce bump

Coronavirus hit an already depressed market in Australia, which was still in recovery mode following a devastating bushfire season — fortunately, the country managed to largely prevent a major virus outbreak and began easing its lockdown in mid-May. Australian media agencies had experienced 18 consecutive months of market decline before the coronavirus crisis hit, and media agency bookings were estimated to drop 42% in April, Ad News reported.

It doesn’t seem the crisis will spell a resurgence for linear TV ratings, said Natasha Pelly, investment senior analyst at Zenith. Excluding news programming, 25-54-year-old TV audiences actually fell 4% in March 2020 versus the prior year. Average weekly minutes spent streaming were up 40% in May compared to February.

Aussie broadcasters are looking forward to the return of sports including Australian rules football, which are anticipated to draw in large TV audiences and an advertising boost, said Nicola Lewis, GroupM AUNZ chief investment officer. Quick-service retailers, which didn’t have to close during the lockdown in Australia, and telecommunications brands are big sports advertisers. Popular shows including “The Bachelor” and “The Masked Singer” are also set to go back into production soon. 

The Australian government has offered a range of relief to media owners, including a 12-month waiver of spectrum tax for commercial TV and radio broadcasters, the suspension of obligations for networks to air a certain quota of Australian produced content, and a launched a ~$32 million public interest news gathering program.

— Lara O’Reilly

Brazil: Bracing for what’s next

As much as 55% of the country’s population is not practicing social distancing, according to an analysis of cell phone tracking data by marketing firm Loco, partly because many working class people cannot rely on government support to get by if they lose their jobs, so they continue to go to work. There have been more than 310,000 confirmed coronavirus cases and more than 20,000 coronavirus-related deaths in Brazil at the time of writing.

The pandemic has already begun to squeeze consumers’ budgets. Even though epidemiologists say that the worst infection rates are still weeks away for Brazil, people have already begun bracing for it: 70% had begun reducing their spending in late April, up from 62% at the end of March, according to a McKinsey survey.  

Unlike the U.S., where news publishers have struggled to monetize their coverage of the coronavirus, the oligopoly that dominates news in Brazil – four conglomerates dominate both the broadcast TV and digital markets, according to the watchdog Media Ownership Monitor — has been able to keep advertisers from cutting back spending too much.

“The power of [Grupo] Globo is so intense that it’s not been an issue here,” said Patrick O’Neill, managing partner of Sherlock, a PR and marketing services firm focused on helping international firms navigate Brazil’s market.

— Max Willens

How
all those different experiments go may determine whether those
subscription-curious publishers survive the next couple of years.

It’s even more important now: Digital advertising has long been a tough business to be in, but for the next several months – never mind the next couple years – it figures to be almost impossible for many publishers and media companies.

In
just two months, digital ad spending has dropped by more than 30%, according to
the IAB. More traditional formats, especially print, have slid even more, fast-forwarding
secular declines that many legacy publishers were hoping would happen at a
slower pace. And economists all expect that it could take years for the American
economy to fully recover from this nascent recession.

That extra pressure, on top of the normal competition they face, will force publishers to decide how seriously they will pursue consumer revenue. While not every publisher needs to be subs-first, or even plan for subs to deliver as much revenue as ads, each needs a firm sense of how reader revenue fits, not just into their business model but into their brand identity.

In this guide, we’ll explore the key considerations publishers need to make when evaluating their consumer revenue strategies. We walk through how some major companies have thought through their strategies, thinking through content strategy, measuring success, distribution issues, and product strategies. The publications profiled in the document have different business models, different resources, and different structures. Their approaches are presented not as prescriptions but as ways to help think about reader revenue and where it might fit into your organization.

Digiday members can access the full guide, including charts and data, below.

The current crisis makes subs even more of a priority for many. Digiday Research found that in the first quarter, ad revenue was hardest hit, decreasing for a whopping 65% of all publishers. This included direct sold and programmatic ad revenue. But subscriptions were a bright spot. Subscriptions actually increased for 29% of publishers, and decreased for only 14% of publishers. For 57%, they stayed flat.

In a survey of 135 publishers conducted by Digiday Research last fall, almost 46% of respondents said growing subscriptions were a major focus for them over the next six months. Other major priorities are building direct-sold ads: 64% of publishers said that was either a large focus or a very large focus area for them.

Neither comes as much of a surprise. Subscriptions are an important and controllable way to generate revenue. Sometimes that even comes at a lower resource allocation cost — Digiday Research conducted last year found that 75% of publishers surveyed allocated less than 25% of their company’s resources to subscription products. In an increasingly unstable digital advertiser landscape, any way to have sustainable revenue streams is a priority.

Unlike other revenue diversification plays like branded content, or commerce, or events, subscription and membership products require different skillsets, attitudes and strategy.

Editorial
teams conditioned to maximize page-views have to learn how to maximize
returning visits, or subscriber conversions. Product teams that built sites optimized
for revenue per visitor need to start thinking about customer lifetime value
instead. Ad sales leaders, long accustomed to setting the agenda for the
revenue side of the business, have to balance their priorities with the needs
of membership editors.

“You
have to really commit,” said Mary Walter-Brown, the cofounder of News Revenue
Hub, a membership organization that helps news publishers build reader revenue.
“It’s not something you dip a toe in. You have to have this ongoing
communication with your audience, and you have to commit to it.”

In
some ways, today’s adverse conditions offer a great time to figure out subscriptions.
With CPMs down and engagement at or near all-time highs for many publishers,
“it’s never been cheaper to invest in the long-term,” Slate CEO Dan Check said.
“So we’re shifting focus to long-term value.”

For most of its history, Slate envisioned its six-year old membership program, Slate Plus, as a source of incremental revenue; as of last year, it had close to 50,000 members paying up to $59 per year.

“You have to really commit.”

Mary Walter-Brown, the cofounder of News Revenue Hub

But
last year, Check decided Slate would start going after members more
aggressively. In late March, Slate put up a metered paywall, with the goal of
converting more of the site’s most avid readers into members. (Prior to the
paywall, more than 70% of Slate Plus members had converted through the
publisher’s podcasts).

Check
said he expects Slate Plus to grow into 20% of Slate’s revenue this year. But
he has no plans to add more features to the product or to pivot the business
model away from its current focus.

“We
still see [advertising] as a good long-term business for us,” Check said, noting
that Slate’s ad business grew by double digits in 2019.  “But we do think
you need to supplement it with something else.”

For
others, the current advertising crunch validates the thesis that reader revenue
has to be the north star.  

Quartz
had already begun shedding roles in its advertising and consolidating around
its subscription business last year, which had around 18,000 paying members at
the end of 2019, according to quarterly earnings.

But the shock of its ad revenue dropping 54% year over year in the first quarter of 2020, part of a first quarter in which Quartz lost $6.3 million, reinforced the necessity of growing a base of recurring revenue.  

“It’s
hard enough to do one thing well,” Quartz CEO Zach Seward said. When Quartz was
getting its membership off the ground, it had separate teams of people in
editorial, product and marketing all working on the program.

Ultimately,
the mindset needed to pursue reader revenue might be more important than how
big a slice of pie that revenue represents. Before New York Media merged with
Vox Media, the goal at New York had been to diversify to the point where
advertising constituted less than 50% of its total revenue, with a combination
of subscriptions, commerce, brand licensing, film and TV and events making up
the rest, said Daniel Hallac, who served as New York Media’s chief product
officer at the time.

“It’s hard enough to do one thing well.”

Zach Seward, CEO, Quartz

“I
think there’s a transition in the industry, where we’re moving from a
content-centric model to a user-centric model,” said Hallac, who now serves as
svp of consumer products at Vox Media.

Hallac
said that same mindset will guide the development of a membership product for Vox
Media, which rolled out a voluntary donation offering just as the pandemic was
beginning to spread. The goal is to eventually turn that into a fully formed
membership program, Hallac said, though there is no set roadmap for how it will
get there. It plans to follow what readers want, and act accordingly.

“We said, ‘Before we go and spend months of resources building a full-blown solution, doing market research, all of that, let’s just get it on the site and keep learning,’” Hallac said. ““It was like, ‘There’s an opportunity to do this now.’“

A new way of working
Creating content for a mass audience is different from creating content for a niche audience. Instead of riding trending topics on CrowdTangle or producing quick hit summaries of movie trailers, looking for more ways to generate more content for a lower price, subscription-focused publishers need to do the opposite.

A
subscription-focused newsroom pays attention to what its most devoted visitors read,
what kinds of stories get a reader interested in one kind of content interested
in another; what kinds of stories get a reader to subscribe to a newsletter,
and then another.

Focusing
on those priorities also requires collaboration and communication across
departments including product, business and analytics, usually more than
newsrooms are used to. At the Seattle Times, leadership introduced this new way
of working one
handful of reporters at a time, connecting the teams that wrote about one
specific topic, such as the University of Washington’s football team, to
product and business-side colleagues who helped the reporters and editors dig
more deeply into what the Times’s audience was reading at standing, regular
meetings.

• The meetings were designed to help the reporters understand data better, but also to help them to figure out new products or strategies that could help the Times drive more subscriptions. Some reporting teams created pop-up, seasonal newsletters; others created blogs. The changes were led by what the audience responded to best.  

• Just getting to that point of building those teams took years for the Seattle Times. About two years prior, it built an internal dashboard that showed the newsroom which stories were driving subscriptions.

• Writers and editors have a reputation for being intransigent, but they can be receptive to change if the reasons for it are clearly explained. Before the Dallas Morning News began laying out plans to focus on subscriber growth, it circulated memos in the newsroom explaining what was happening in the digital advertising ecosystem, right down to declines in CPMs, as a way to make the case that subscriptions were a more promising strategy than advertising was.

A new way of measuring success
This year, the reporters at Tribune Publishing titles will all get access to a dashboard licensed from the American Press Institute, which shows reporters how many existing subscribers read their stories and how many subscriptions it drove, in addition to the pageviews.

• Like the dashboard the Seattle Times built, the dashboard is designed to get reporters to think differently about the impact their work has. Over time, it could be used to set subscriber targets for the reporters, but there is no timetable for doing so.

• Setting subscriber goals is an important, but fraught step in pursuing a subscription strategy. While publishers such as Business Insider dole out bonuses based partly on how many subscriptions their work drove, others set non-binding growth targets for their reporters instead. The targets are non-binding partly because most newsrooms are still getting used to the idea (and partly because a binding target might run afoul of a newsroom union contract).

• There is also no consensus on how to decide whether a story led to someone subscribing. Some publishers give stories a certain amount of credit depending on how many days pass between the story being read and a subscription occurring; others give all the credit to whichever exclusive story someone signed up to read.

Read more: The coronavirus has meant a real opportunity for publishers to gain (and keep) subscribers.

For
an ad-supported publication, the goal of distribution is simple: Secure the
largest possible top-line audience for the lowest possible cost. For a
subscription-focused publication, the priorities are a bit more complicated.

While
some amount of low-cost, scaled audience is needed, distribution strategies for
subscription publishers tend to be shaped by user journeys. Very few
subscribers will get out their credit cards the first time they are asked to
pay for content, so publishers need to understand where their subscribers read
their content, what brings them to their site, what kinds of content typically
compels people to convert, then distribute accordingly. If a person won’t pay the
first time, the goal is to put that person in position where they’ll hit the
paywall again and again until they do.

Some of that work happens on social platforms like Facebook, where publishers such as the Wall Street Journal spend money to distribute stories that came up most often in subscribers’ user journeys. It also happens on Snapchat, where The Economist fills the top of its funnel with readers who may not subscribe for a long time.

Which
platform a publisher uses to distribute something partly depends on the role
that content is likely to play in a subscriber’s journey. The Minneapolis
Star-Tribune, for example, puts stories that led to the greatest number of
subscriber conversions in its recirculation
widgets for registered readers.  

But some of the most crucial distribution decisions are made before a story even hits a website. Subscriber-exclusive content can be a powerful way to drive subscriber growth, but it can also mean one less story to distribute to potential subscribers. Many publishers that choose to make select content exclusive to paid members will begin by not putting enough behind a paywall, then slowly ramp up. The Daily Beast, for example, recently drove a 100% increase in membership signups partly by increasing the amount of content it made exclusive to members.  

Read more: The Daily Beast CRO Mia Lehmkuhl Libby explains how the Beast is seeing 30% declines in programmatic ad revenue but offsetting those with “three digit” increases in subscriptions.

Video
The economics of ad-supported video have challenged publishers for years, and
the economics of video for subscriptions can seem even more daunting. Instead
of distributing the video across multiple ad-supported platforms and websites
and hoping to cobble together a profit, a subscription publisher has to deliver
a high quality product to a much smaller audience, then try to figure out whether
the investment was worth it:

Are
the videos a good investment if they lead people to convert? Are they a good
investment if they retain subscribers and reduce churn? Are the videos doing
one, or the other? Both? Which is a better investment?

These
questions help explain why few publishers have made exclusive videos part of
their subscription products. But a handful have.

• Quartz, for example, has concluded that high-end, exclusive video content can motivate people to subscribe – it is the second most effective driver of subscriber conversions, after in-depth guides that its reporters typically spend more than a month producing. The publication’s team uses data about what its audience reads and engages with the most on its site to guide its video strategy, hoping to lead more people to its paywall.

• By contrast, Architectural Digest has decided to treat video as a supplementary element of its B2B subscription product, AD Pro. Subscribers get a couple of in-depth videos every month, and AD keeps costs low by sending crews to locations where its ad-supported video content shoots are already underway.

Email

• When it comes to driving subscriptions, email is king. Publishers use email in a variety of ways, either to market via offers to people already in their databases (at the top of the funnel) or to market specific types of content to specific segments.

• Digiday research conducted last year found email — specifically, adapting the frequency of email, to be the most effective tactic.

• Second was “customizing content” for users while tactics like bundling weren’t that popular.

In the old days of print media, consumer revenue was pretty easy to figure out. If somebody wanted to read a magazine or a newspaper’s contents, they had to pay for it.

Digital
media offers more flexibility (and complexity). While many publishers use a
simple paywall as the foundation, others have found success disaggregating
their content, bundling it with services, or making community interaction the
selling point. A user-centric approach is the common thread through all of
these approaches.

Disaggregation
Just as publications sell different parts of their content to different kinds of advertisers, that same content can be packaged and sold directly to readers in different combinations. Newspaper publishers including McClatchy, Hearst, and the Dallas Morning News offer standalone subscriptions to their local sports coverage. The sports subscriptions cost less than a regular newspaper subscription but boast strong retention (and attract subscribers no longer living in the newspaper’s geographic area). In a similar vein, Vice built a freemium astrology app that has been downloaded over 100,000 times.

The
finer one slices one’s content, however, the lower the ceiling gets for a
product. Esquire, for example, sells a “micro-membership” around one of its
best-known writers, the politics
blogger Charles Pierce. Over 10,000 people pay $17.99 per year to get unlimited
access to Pierce’s work, as well as an exclusive newsletter and a tote bag. It
would be hard to charge much more for a portion of content available on a site
with no paywall, as well as a physical magazine whose subscriptions can be had
for not much more.

Bundling
After a publication has converted as many subscribers as it
can using its core product, many will turn to bundles as a way of luring in a
second, incremental tranche of customers. Those customers typically generate
less revenue per user than a core subscriber, but they make up for it with scale.

They
also create an interesting marketing puzzle. What kind of content or services
complements a publication’s core offering?

Bundles
can include services as well as content. The New York Times has experimented
with subscription bundles that include Spotify and Scribd, while TechCrunch has
rolled a collection
of paid perks, such as 12 months of free cloud storage and early access to
its events into its membership product, Extra Crunch.

Some bundles can be bespoke, or temporary. The New Yorker, for example, will temporarily add its content to a bundle like Apple News+ by windowing the print editions of their magazines, both to maximize its value while exposing it to multiple audiences at the same time.

Membership
or subscription?
While access to content is typically sold as a subscription, many publications
have styled their consumer revenue products as memberships, a distinction that
quickly becomes meaningful the more you think about it.

After
testing out a membership product, The Masthead, in 2018, The Atlantic decided
to reframe its paid digital offering as a subscription in 2020, in part because
it decided not to build the infrastructure needed to support the continuous
exchange it decided it would need to offer as part of a membership; Atlantic
president Michael Finnegan told
Digiday he wanted to clearly communicate to readers that they were paying
for access, rather than entry into a kind of club or community.

By contrast, some publications frame their products as memberships because they see them as ways to deepen the connections they have to their most passionate readers. Samantha Henig, the executive editor of BuzzFeed News, said that while direct revenue is important, the goal of BuzFeed News’s membership program, which accounts for less than 10% of revenue, is to establish a direct line of communication with the people who are the biggest fans of the nascent brand.

Digital
publishers are forced to constantly refresh their skills and talent to keep up
with quick changes in the space. And many publications with legacy print
businesses have the infrastructure needed to do some consumer marketing. But
pursuing digital subscription revenue requires an entirely different base of
skills, many of which are not native to media as an industry.

Publishers
planning a move into consumer revenue may have to either add new executive leadership,
or prepare to have them learn some new tricks.

The New CMO
At one time, the CMO role at most media companies was a quasi-B2B communications role, focused on the needs of a small audience: The leaders at top advertisers, trade groups and platforms.

The
CMO of a modern publisher pursuing subscription revenue is focused on a much
bigger audience, and their priorities are very different: Efficiently deploying
resources to acquire – and keep – subscribers.

• Finding that skillset can be tough. Over the past two years, a number of large news organizations, including the Washington Post, Hearst Newspapers and The New York Times have added new CMOs, in Hearst and WaPo’s case, for the first time. Others, such as USA Today, have changed theirs, with the new hires bringing skillsets that reflect these changing priorities.  

• Rather than working mostly with the sales and marketing teams, the CMO of a publisher pursuing subscribers has to work closely with product, editorial and finance to ensure that everybody is aligned around similar goals. A strong focus on customer acquisition, analytics and retention are essential.

• Like their counterparts at brands, the subscriber-focused CMO is beholden to lots of his colleagues in the C-suite: To heads of content or editors in chief, who figure out what kinds of content to produce for an audience, or the chief product officer, who figures out what an audience wants and guides the publisher’s teams in that direction.

The
New Audience Development Team
At one time, “audience development” was code for “audience growth.” Though the
tools used to drive that growth differed – some relied on Google or Facebook,
others on email – the top priority for audience teams tended to be growing the
scale of a publisher’s audience, regardless of quality.

• For publishers focused on subscriptions, the platforms and the tools remain largely the same, but the priorities are different.  Today, audience development teams at publications including the Boston Globe also have to focus on deepening the relationship readers have to their brands: Driving more newsletter signups, boosting time spent on site, or figuring out which segment of an audience should see a promotional offer for the brand’s newest subscription product.

• Audience development roles are often situated in the newsroom, which can make the emphasis on revenue feel uncomfortable at times. But driving subscriber growth requires editorial teams to work more closely with other parts of a publisher’s organization.

Growth
Marketers
While audience development has historically focused on driving organic
engagement and growth, some publishers have invested in growth marketers to
augment the audience development team’s work with paid promotion.

• Publications including The New York Times and The Wall Street Journal have large teams whose job it is to drive paid promotion of their subscription products, but smaller publications have begun hiring for the job too.  

• Hiring for those roles assures that digital marketing budgets are spent more effectively. But they also give publishers, who typically used marketing for different purposes, the expertise necessary to communicate with subscribers off-platform in ways that keep them engaged and retained. And to find them, publishers have been forced to hunt for talent not just at agencies but at DTC brands and their competitors.

Product
Managers
Subscriptions typically require significant amounts of ongoing collaboration
across product, editorial and marketing. That, in turn, creates a need for
product managers, who can keep disparate parts of an organization aligned while
pursuing various strategic goals.

• The Washington Post has tripled the number the number of product managers it employs over the past three years, while publications including Vox Media and Bloomberg Media have been snapping them up as well.

• But product managers also pose thorny problems for publishers. They create organizational headaches and upset power dynamics; they can be difficult to find and keep; and they force publishers to reckon fully with just how committed they are to acting like the owners of digital products, rather than the producers of content.

Membership Editors
Publications ranging from BuzzFeed to HuffPost to The Intercept have sought to hire membership editors, a job whose responsibilities differ from place to place. Some see growth hacking as an integral role; some see editorial experimentation and product development as more important.

• The responsibilities for these roles differ significantly. The HuffPost listing, for a “deputy managing editor of membership and innovation,” called for someone who can create new engagement and messaging strategies, while Quartz’s deputy membership editor listing focused on identifying “creative and compelling editorial approaches for paying readers”; listings posted by BuzzFeed and the Intercept list driving membership growth as a key priority.

• But there are some commonalities: connecting with product, marketing and editorial colleagues, messaging and distribution and marketing membership products.

• But the balance between those tasks varies widely, illustrating how nascent membership operations are at most media companies.

Finding talent can be difficult

Hiring new talent is a challenge for the vast majority — 71% — of publishing executives surveyed by Digiday. But the hardest roles to hire for aren’t in editorial — they’re in product.

• Digiday Research surveyed 134 publisher executives to ask them about what in terms of talent management they’re finding hard, and the roles they find it especially hard to recruit for.

• Digiday Research also asked what type of talent was the most important one that publishers were looking to hire in the coming year. The most important one: product developers and product managers. Fifty-eight percent of respondents said that hiring product developers and managers was very important or important. 

Churn
The rate at which paid customers cancel or don’t renew their subscriptions.
Unlike some other media statistics, there is no universally agreed-upon way to
calculate churn, since it can be measured different time periods, such as
monthly or yearly. That makes churn tough to talk about, though it is generally
accepted that high-priced products should have lower churn than more affordable
ones: In theory, a higher priced product delivers more value to a smaller audience.
 

ARPU
An acronym for “average revenue per user.” ARPU is the number that allows a publication to consider the amount of money, be it in the form of ad revenue generated or subscription revenue, that an average reader brings in.

LTV
Lifetime value, the amount of revenue a publisher expects to earn each time it
acquires a subscriber. Though it takes several months – at least – to set LTV
on a product, it can become the lens that publishers view every product
decision through.

Rather
than thinking about maximizing the revenue a publisher might get out of a
person’s single visit to their website, LTV shifts the focus to the amount of
money the publisher might earn from years of subscriber visits. That focus has
helped some publishers consider ideas ad-free experiences for subscribers.
 

MRR
Monthly recurring revenue, a number that summarizes how much money a publication’s subscription product delivers every month. This is the number that communicates most clearly why consumer revenue is so attractive to media companies.

Inside the Daily Beast’s ‘corona bump’
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Publishers’ biggest subscriptions challenges in five charts

For HBO Max to succeed, WarnerMedia will have to thread the “mastige” needle and establish its streaming service as the Disney+ for adults, a more curated option for grown-ups weary of sifting through Netflix for something to watch but with a variety well beyond HBO’s existing high-minded “gallery” approach.

It’s easy to doubt AT&T-owned WarnerMedia pulling this off. After all, Kantar analysis prepared for The New York Times indicates most people typically pay for just three platforms. The streaming dance is already crowded enough, with dance cards filled and a recession hitting wallets. What’s more, HBO Max is twice the price of Disney+.

All that said, WarnerMedia has a position of strength. With a built-in base of existing HBO subscribers and a library of familiar TV and movie fare, HBO Max has a shot at becoming adults’ preferred supplement to Netflix. If the streaming must-buys for households with kids are Netflix and Disney+, then those without may sub in HBO Max. Many want to position HBO Max as a Netflix rival, but it’s more of an add-on, competing more for second or third place as the top slot.

WarnerMedia is also not starting from scratch like NBCU’s Peacock. Of the 34 million people who subscribe to HBO through their pay-TV providers or pay for standalone streamer HBO Now, a majority will automatically receive access to HBO Max. These people already shell out $15 each month for regular HBO — soon-to-be AT&T CEO John Stankey calls switching to HBO Max an “IQ test” for these people — so they are unlikely to suffer sticker shock when they see that $15 now gets them a larger library with more than 10,000 hours of programming. WarnerMedia is counting on those people making that calculation to accrue the 36 million U.S. subscribers it has projected HBO Max will have by the end of 2020.

Winning over everyone else, however, will be a challenge. HBO Max bows as the most expensive mainstreaming streamer on the market at the worst possible time. Yes, Netflix’s most popular subscription tier is only $2 cheaper. Sure, people currently saving on their bar bills can use that money to pay for HBO Max. But millions of people have lost their jobs, and others are likely looking to rein in costs in case they might.

The average daily number of households that stream shows on connected TVs grew by 11% between March 9 and April 13 to reach 50 million households, according to Comscore.

Meanwhile, anecdotes abound about audiences stuck at home streaming shows that have been off the air for years. In April, people spent almost 11 million hours streaming “The Golden Girls” on Hulu. HBO Max’s library is loaded with the kinds of comfort programming that people are seeking out at the moment. Its lineup spans all of HBO’s programming as well as old shows like “Friends,” The West Wing” and “The Big Bang Theory” and movies such as “Wonder Woman,” “The Lord of the Rings” and “You’ve Got Mail.” The streamer will also have original programming, though the production shutdown has delayed some shows like a “Gossip Girl” reboot now slated for 2021.

Non-HBO subscribers may not see HBO Max’s library as being worth $15 a month. But after a time, they won’t need to. Next year, WarnerMedia will introduce an ad-supported tier to the service that will lower the barrier to entry.

Confessional

“If we reach out to someone at Instagram, they will loop in someone from Facebook. It’s so weird that we can’t reach out directly [to people at Instagram] and get answers, even if it’s a quick question.”

— Media executive

Stay tuned: TV advertising’s potential tipping point

TV advertising’s upfront market is founded upon prices being cheaper than in the scatter market. But the gap has narrowed as traditional TV advertisers cancel their upfront commitments and quarantined audiences spend more time watching TV.

With advertisers set to cancel at least 20% of their third quarter upfront commitments, according to agency executives, upfront and scatter prices may come closer to parity. And if scatter CPMs slip below the upfront rates, that could could be what undoes the upfront market. “Then the precedent is set because then why buy in the upfront?” said one agency executive.

Numbers don’t lie

80%: Share of YouTube ads running in April that were not related to the coronavirus crisis.

Trend watch: Influencers on OnlyFans

In early April, an entertainment executive who works with a lot of digital video creators sent me a message asking if I had heard about creators setting up OnlyFans accounts to offset the revenue they are missing from marketers pulling out of branded-content deals and cutting back on platform advertising. Not only had I not heard of creators doing that, but I hadn’t even heard of OnlyFans. 

If you have not heard of OnlyFans, it seems like a combination of Patreon and PornHub: people post illicit photos and videos to be seen by other people who pay to subscribe to the platform. 

That made me think the entertainment exec was either trolling me or working with a new type of clientele. Nope. Apparently he was way early on a new trend. So many influencers have flocked to OnlyFans that it has received a 75% increase in sign-ups and is adding 170,000 new users a day, according to Huffington Post. I have a hard time seeing OnlyFans give Patreon a run for other people’s money, but who knows? These are weird times.

Quibi watch: Advertisers defer payments

Quibi’s debut has not gone well, to say the least. In the latest example, some of Quibi’s launch advertisers are asking to defer their payments because of the service’s low viewership, according to The Wall Street Journal. Advertisers asking to delay their payments is not the same as advertisers asking for their money back. But it’s a step down that path and suggests the road is getting even rockier for Quibi.

What we’ve covered

TV advertising’s business outcome guarantee deals in jeopardy:

• TV ad buyers and sellers are trying to determine if business outcome guarantees have a place in this year’s upfront negotiations.
• All the uncertainty makes it hard to project guarantees in long-term deals, which could be a boon to the scatter market.

Read more about TV guarantees here.

How Kevin Mayer gives TikTok an aggressive leader to break into the big leagues:

• Mayer was instrumental in rapidly transforming Disney’s business to keep pace with the tech giants.
• Now he’s charged with getting TikTok’s parent company ByteDance on that level.

Read more about Kevin Mayer here.

Falling TV ad prices lure in DTC brands:

• Traditional TV advertisers canceling campaigns has created an opportunity for digital-first advertisers to test TV at bargain rates.
• The good rates are beginning to go away for networks’ best inventory, though.

Read more about DTC advertisers testing TV here.

Charities turn to TV ads amid fundraising squeeze:

• Healthcare and awareness nonprofits have increased TV ad impressions from April through mid-May.
• TV’s discounted rates means the organizations don’t need to spend more on ads than they did a year ago.

Read more about charities’ TV advertising here.

ViacomCBS’s streaming upfront pitch: We won’t repeatedly show people the same ad:

• ViacomCBS is looking to tackle one of TV advertisers’ top streaming frustrations.
• The company is pooling its streaming inventory and updating its ad tech to better manage ad exposures.

​Read more about ViacomCBS here.

What we’re reading

Repurposed programming:
To fill their programming pipelines, TV networks like Fox and The CW are stocking up on shows that have aired on other platforms, according to The Hollywood Reporter. No word on whether they’re desperate enough for old Go90 shows.

Can YouTube stave off Spotify?:
Spotify’s exclusive deal with Joe Rogan removes one of the most popular video podcasts from YouTube’s platform. That could lead to a flood of services snatching video podcasts away from YouTube, like how YouTube and others lured gaming talent away from Twitch. But those platforms will need to prove they can get an audience to tune in with their eyes, according to The Verge.

Costly return to production:
Hollywood is preparing to return to work and starting to find how expensive that can be. The necessary precautions not only add to the production schedule but also extend shooting schedules, according to Variety.

While the virtual raves are nothing like the heady highs of being there in real life, they do fill that time slot and keep the beer in mind. It’s giving people a reason to remember what they loved pre-lockdown, said Diederik Vos, global brand director at Desperados.

That’s hammered home by the inclusion of competitions for viewers to win a party starter pack, acrobatics, and performers during the sets, with Vos keen to create settings that offer something different to the deluge of mundane video conferences people are on during lockdowns. Plans are already underway to live-stream similar Desperados events on Twitch, for example. 

Ironically, experiential marketing like this could be one aspect of marketing that Heineken does more of not less during the recession. Speaking to analysts last month, the company’s CEO Jean-François van Boxmeer said Heineken would cut advertising budgets across its beers and would shift some of the residual money into activities that help its on-trade customers and reflect social distancing. Indeed, virtual events like those Desperados his hosting have the potential to foster community in a touch-fee world. They cost less than £100,000 ($120,00) and in some cases can be as little as £50,000 ($60,900), said one event organizer with knowledge of Desperados plan.

“We will continue to use the full marketing mix during these times, which also includes TV, but are efforts will continue to be stronger in experiential and digital,” said Vos. “We were already a digital-first brand through a lot of the work we’re doing on mobile and everything that’s happening now in terms of how people are consuming content will accelerate this.”

One big advantage of hosting virtual events is the scale of brand awareness and engagement if the activation is done well.

“No longer is your audience only limited to the number of people you can touch physically and those share the experience on their social channels,” said Leila Fataar, founder of cultural marcomms company Platform 13. “It [social distancing] will definitely change the way territories work in terms of global brand activation and the opportunity to globalize your brand even quicker than before.” 

This doesn’t mean Desperados will turn its back on live events. The brewer has been one of the more progressive experiential advertisers for several years with immersive seasonal parties and immersive light shows tentpole events on its marketing plan. But those events may be side-lined for a while yet. Even when the lockdowns are fully lifted, it’s unlikely that most people will be rushing to mass gatherings. Both smaller and virtual events could see a rise in popularity. In turn, Desperados is introducing reworked planning processes, particularly when it comes to how to measure the success of a virtual event.

“More people are shopping online, conversion is higher and we’re getting better at anticipating consumer demand because it’s happening in real time,” said Ali. “If you have not had a commerce business in the past or you haven’t doubled down on it, now is the time to do so.”

Coronavirus has driven several changes to BuzzFeed’s commerce business, Ali said. “It has upended everything,” she said. Some top changes:

• Traffic to beauty and makeup articles has surged, along with that to home furnishings and, oddly enough, sex toys.
• The editorial team and affiliates team work more closely together, necessitated by rapid changes in shopping habits and retail inventories.
• Retailers have relied more on promotional tactics, leading BuzzFeed’s commerce content to emphasize cost saving and utility rather than time saving and aspirational.

“Test as many things as you can right now because the influx of people shopping online means the signal we can get in real time is much faster,” said Ali. “It is a time to be risky and get as many learnings under your belt as possible and make money while you’re doing it.”

In the latest Digiday+ Talk, exclusively for Digiday+ members, Ali talks about where BuzzFeed placed its bets on commerce during the pandemic, and where her team anticipates the possibility for more growth.

Taking big bets on promotions

Promotions put on by retailers have offered a unique opportunity for BuzzFeed to grow its affiliate business during the pandemic, Ali said. Having ongoing conversations with its retail partners to learn about any promotions enabled the publisher to produce timely content that it could pass on to its consumers. 

And because the prices of the products in the promoted content were less expensive, there were products that would fit in consumers’ budgets, who are mindful of their spending given the economic downturn. “Even if overall spending is down, more people are shopping online so the pie is bigger,” Ali said.

• “The retail space was becoming hugely promotional,” said Ali. “We’re seeing sales and discounts happening across the board that were comparable to what we typically see in Q4 during Black Friday/Cyber Monday, which presented a new opportunity for publishers to take action on.”
• One promotion in particular that Ali said her team took a big bet on from a content perspective was a sale that home decor and furniture company Wayfair had in April. She said that the edit team doubled down on content and specifically leveraged social media and newsletter channels to push this content to readers. The team also did on-site promotions of this content to drive awareness to the sale. The testing around the distribution strategy paid off as April 2020 Wayfair sales increased 362% year over year.  
• If there are certain retailers or products that you haven’t leaned into in the past but have a promotion for products that are timely and likely to resonate with your audience, Ali said that now is the time to dedicate your distribution channels to pushing those things because it is likely that they will pay off now more than ever.

Managing affiliate partnerships 

BuzzFeed has thousands of retail partners, which can make managing those relationships a daunting task, regardless of the size of your commerce operation. While only 10-20% of those relationships are currently having active conversations with the publisher, she said that there are still a lot of relationships that need to be maintained weekly to ensure that BuzzFeed is abreast of the promotions retailers are doing and the trends they are seeing in their customers’ purchasing. 

On the other hand, publishers are in the unique position to serve as a major resource for retail partners right now. 

• Retailers also do not want to come across as trying to capitalize on a tragedy, so they are turning to BuzzFeed, and other publishing partners, to serve as a guide in approaching consumers in a way that comes across as helpful, Ali said. 
• Do not be afraid to use affiliate networks and affiliate agencies who can do most of the leg work for you, especially if your team is lean. Ali said that this is a significant resource that the publisher has been leaning on during this time as her team works to stay up to date on the latest movements in the retail environment.

The impacts on advertising

Typically publishers cannot, at-scale, drive the purchase intent that other media buys can, especially when the content being produced is extremely timely with what consumers are actively looking for, Ali said. But this time period has allowed BuzzFeed and other publishers to prove that they are able to push forward more conversions, like in the Wayfair example. 

Therefore, publishers can start to look more at not only selling ad campaigns featuring commerce opportunities, but also look at how to include storytelling and the discoverability of new brands and products in those campaigns. 

Publishers also have a goldmine of data around what consumers and both reading and buying, Ali said, putting them in a great position to bring these two areas together within branded content. She said there is a great opportunity to tie the affiliate business into the branded content business right now and after the pandemic.

Information A/S CEO Stine Carsten Kendal told Digiday she credits the newspaper’s tight focus on reader revenue for helping it to weather the most severe impact of the coronavirus crisis — despite taking a hit on ad revenue in the second quarter. The plan now is to continue diversifying Information’s revenue streams, in areas such as subscribers-only podcasts — but definitely not by licensing content to platforms or through native advertising.

This interview has been lightly edited for clarity and length.

Are subscriptions your biggest revenue driver?

Information has always been subscriber based, now the whole industry going in that direction. [Subscriptions drive around 60% of Information’s total revenue.] We [launched] a proper digital subscription [five years ago]. We also have a digital week, where you get the print newspaper on weekends, which is very popular. We’ve been growing for five years and our print decline has been offset and more by our digital growth.

How have you diversified revenue? 

We do special projects supported by public or private foundations. It’s not a huge revenue stream, but it’s something that’s been helping us develop new events. We have had media schools where we train young scientists to present their knowledge and their science in a way that media are able to use. We’ve had courses for our subscribers. We’ve always had a small publishing company and we’ve continued that with a focus on the same topics that we cover in the newspaper. 

All Danish newspapers receive some public funds and it’s been a major help in securing plurality in Danish media. In a small nation, there is a risk there would just be a few players standing. [Public funding] is around a fifth of our total annual revenue.

How are digital subscriptions evolving?

In Denmark we have zero-VAT on print newspapers. Last year it was extended to digital subscriptions. That’s been helping digital revenue.

We have been experimenting with a few digital products that are at an even lower price. For example, you can just subscribe to our climate coverage for pretty much the price of two cups of coffee.

What are your 2020 growth plans?

We will focus very much on retention. We have gotten a lot of new subscribers during the coronavirus crisis. We offer a one month free trial period and people have been signing up like crazy — even though we’ve had no paywall on our corona coverage.

The younger audience in Denmark is listening more and reading less and we want to see how we can transfer our journalistic experience more into sound — if we should read our articles aloud, or have more of a behind-the-paywall experience with sound. 

[Podcast] revenue is very low. Sometimes we have no advertising and we use them more for self-advertising, like ‘Try our newspaper free for a month’ or ‘listen to our other podcasts’. The podcast advertising market is not very developed in Denmark yet.

What is the relationship like between Danish publishers and Google and Facebook?

The Google Digital News Initiative has given support to a number Danish news projects. We have also had a project partially funded by this news initiative, which ended last year.

It is problematic that both Google and Facebook have such a huge impact on all our revenue, especially with the infrastructure they control. It’s a huge global problem. We have no way of doing checks and balances as a society and as a news industry on what is shown on these platforms. Who decides how the algorithms work? Who decides what you get to see? It’s a huge concern for our democratic debate and it’s something they slowly started addressing but they should address a lot more.