Casual payments could be the answer if media advertising vanishes

By Shelley Seale

INMA

Austin, Texas, USA

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How would the media cope if advertising revenue completely vanished?

This was the question asked and discussed in a Webinar for INMA members on Wednesday. Dominic Young, formerly of News Corp International and currently a media commentator, presented his vision for a redefined media landscape that is bigger, more competitive, and more profitable than ever before.

Re-thinking the economic pillars of the media, focusing single-mindedly on consumers, and taking a careful look at how the media’s relationship with the Internet evolved to its current dysfunctional state leads to some conclusions that are simple and actionable. The insights discussed in the Webinar can help media companies begin to reduce their dependence on advertising, and increase their profitability, right now.

“The search for a new business model has been slightly hampered by the need to retain what’s already there,” Young said. “It’s quite difficult to continue doing what you’re already doing and at the same time do something new.”

This challenge, and many discussions with a number of media organisations, led Young to consider the question at the forefront of this Webinar: How would a world without advertising look?

Imagining a world without advertising revenue was the focus of this INMA Webinar.
Imagining a world without advertising revenue was the focus of this INMA Webinar.

The post-advertising landscape

“I don’t think that’s necessarily going to happen, but it is a question we need to ask,” Young said. Shares of advertising market amongst news brands has been declining steadily. According the Group M research, in the United Kingdom news brands’ share of the advertising market has dropped from over 40% in 1999 to between 5%-10% today.

“Anyone who is still building a strategy around advertising and the retention of advertising revenue has to confront the reality, I think, that our ability to stop this and reverse it is really quite limited,” he said.

The reason is news media brands no longer have the dominant ability to reach the audience. With the power of the Internet and the strength of major tech companies and platforms such as Google, Facebook, and Apple, media publishers have a difficult time capturing that audience the way they once did.

“Our ability to command that audience simply doesn’t exist anymore,” Young said. Therefore, media publishers must consider the post-advertising landscape and how their business models must transform to address it and survive.

Most publishers would say the next model to look at would be subscription revenue. While Young agrees that a subscription business is vitally important, he stressed that there are problems with it as well.

  • Most people bounce off paywalls, hiding your product from potential customers.
  • It doesn’t scale well. Growth gets harder as the subscriber base increases.
  • Competition for limited subscriber commitments gets more difficult as more publishers adoption subscription models.
  • It simply doesn’t work for many products and demographics, rendering it inherently limited.

“I don’t think subscription is the answer,” Young said. “But consumer payment is absolutely the missing piece of the media jigsaw.”

A casual payment world

Young urged INMA members to think about the pre-Internet world. In those days, payment was as casual as consumption. In the UK, a significant portion of pre-digital newspaper and magazine readership was done through casual payments, not through subscriptions — and this was likely the case in the rest of the world. Newspapers and magazines were predominantly bought in shops, often on impulse or because the opportunity was there.

“Casual payment is a good phrase for what I think the media needs because it matches the behaviour of consumers.”

In this world:

  • Payment becomes as casual as browsing.
  • There are no walls, barriers, or multiple sign-ups.
  • Pricing matches the value.
  • There are no inherent limits on the market.

Casual payment completely changes the nature of the news media/consumer relationship, and fills in the gap.

“At the moment, media is squashed up at opposite ends of the value proposition,” Young said. “At one end there are a huge number of free [Web] sites, but the economics of that are perilous and declining. [At the other end] there is a pretty small number of successful subscription sites — and nothing much in between. But in between is where we know user behaviour is.”

Could media companies change and thrive?

“The question is not only could you survive, but if you are existing in this world where there is no inherent limit, could you thrive? Could you expand and grow and become more profitable?” Young asked.

Young believes it is perhaps easier to move beyond the advertising-or-subscription revenue question than people think — but not without change. This means putting the consumer back into the driver’s seat of the economics.

“I think it is possible to return to a thriving media market, but there is some change needed. What would the product need to look like in this post-advertising world? Because solving the payment problem doesn’t solve everything.”

Because of the way the Internet has evolved and put limits on the capabilities of news publishers, this status quo has done strange things to publishing.

  • Optimising revenue in an advertising and data-centric world doesn’t always produce the best product for consumers.
  • Excessive, intrusive advertising, along with tracking, clickbait, and SEO.
  • Reduced ability to invest in content.
  • The result is often un-lovely.

“It’s not true that simply by expanding the reach and popularity of your product, you’re guaranteed to be able to make more money,” Young said. “And it certainly isn’t a linear link between how popular you are and how much money you make.”

Adopting a casual payment model means re-thinking product.
Adopting a casual payment model means re-thinking product.

Casual payment requires a re-think

Looking to adapt a casual payment model requires a product re-think, Young said: “Three big things are different in this world,” as he described it.

  1. The consumer is the customer. Building a product focused entirely on them becomes imperative.
  2. Revenue becomes scalable. The more popular you are, the more money you make. Investment can be paid back.
  3. The market becomes collaborative. Companies are no longer competing for a limited revenue pool, which changes incentives.

This could also change the relationship that publishers have with the big platforms, Young added.

These differences also lead to new imperatives.

  1. Market and product appropriate pricing. Every publisher can adopt the right price for their product and audience.
  2. Investment in product pays back. With scalable revenues, better products make better money. Consumer behaviour becomes habit, not commitment, driven.
  3. Do less, better. It’s not just about sheer scale anymore, which is good news for smaller, local publishers.

“When this starts to become a realistic outcome for [publishers], almost always one of the first things that happens is they turn their attention to doing fewer things, better,” Young remarked.

Casual payments present a potential to create a thriving media market.
Casual payments present a potential to create a thriving media market.

The potential for a thriving market

If publishers make great products, market them well, and attract loyalty — and readers can pay for what they want, when they want it, from a wide range of publisher sites, this model could create a thriving media market, Young said.

“If they read more, they spend more. The market does not hit a ceiling where the consumption is continuing to rise but the revenue is going in the other direction.”

Readers are also more likely to form a relationship with an actual product, rather than content consumed through social media or an aggregator. Publishers, as well, can collaborate to encourage greater consumption. Publishing builds its own network, in short, and publishers make more money by selling more product. Independent, niche publishers can thrive alongside big brands.

This model is actually very familiar and one that publishers know well, Young said, because it had been the model throughout publishing history until the Internet up-ended it.

“It has completely decimated the business model of many parts of the media,” he said. “Some parts of the media have ended up with this inverted world in which the more traffic they get, the less valuable that traffic becomes.”

The potential for a market like this is huge, Young said: “The network is already there. Media has a network at least as big as Facebook or Google. Because collectively, media talks to everybody. We have a powerful network, we just need to activate it. The question is, how?”

The ability to collect casual payments is the missing piece. Young started a business to put that missing piece in place, he believes.

All poses the question: Can we actually create structural change for the Internet?

“I just think, let’s not forget who we are. We’re the media. We talk to everybody. And actually, the Internet is proving at the moment to be a little disappointing for consumers. The power of the platforms is beginning to raise eyebrows amongst legislatures, amongst media companies, and even amongst consumers, too. This is a moment when everything is changing, and this is a moment when we, as an industry, can create change for ourselves.”

He cautioned that if the media waits for someone else to present the answer, we will see the repeating pattern of what’s happened on the Internet before, with other incentives coming first.

The need for change is now, and the heyday of advertising is over.

“It remains true that when consumers move online, advertising money does not follow them. Getting started with change is a tiny step; the big change is the evolutionary one that happens after that. The more publishers join the network, the more consumers will join it. But it’s up to the whole industry to make that happen.”

About Shelley Seale

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