Having converted most news brand fans and heavy users, publishers often face a challenge: How do you grow reader revenue even further? One way is to sell more products to the existing customer base. Another way is to take paid offerings to the mainstream market and start charging light and medium users of your outlets, as well as users of your content on other channels.
Based on original research and analysis, INMA Researcher-In-Residence Grzegorz Piechota shared exclusive insights in a Webinar for INMA members Monday morning. Piechota opened the Webinar by saying the focus would be on how to reach the other 97% of the market that are not current subscribers.
Digital subscriptions: What we’ve learned so far
There are certain patterns that have been established in the environment of digital subscriptions that publishers have been navigating over the past number of years:
- Usage drives purchase.
- Habit drives usage.
- Brand and channel preferences drive habit.
“We’ve worked hard at retaining readers, but the big question remains: What are we doing about the other 97% of readers who aren’t subscribing?” Piechota posed to the Webinar attendees. “Who are they? How are we going to reach them?”
Paywalls as segmentation tools
There are two ways to look at news paywalls, Piechota said. The most common is to look at the value proposition of what’s behind the paywall — what is that content, and what will people pay for?
“I suggest you try to look at paywalls another way, which is who is getting through the wall?” Piechota said. “If we look at paywalls as segmentation, we realise that different types of paywalls filter out different people.”
- Users with particular interests: freemium/premium models.
- Heavy users: meter paywalls.
- Users with a strong attitude toward the brand: hard paywalls and membership models.
- Users with a mix of attributes: hybrid paywalls and dynamic/adaptive paywalls.
The moment growth stalls because you’ve hit the ceiling is called “crossing the chasm,” Piechota said. New product adoption stalls as one redefines its marketing mix for a new segment.
Case study: Aftenposten
Piechota gave an example of the Aftenposten in Norway. “In just a year they hit that plateau and they couldn’t grow anymore, so they started asking what they should do next.”
Aftenposten’s growth stalled after its segment of heavy users was exhausted. The reason was only 9% of visitors hit the paywall meter, which was set at 20 articles per month. “But then, they just couldn’t grow anymore because there weren’t enough people wanting to read more than 20 articles per month.”
The Aftenposten team began asking themselves if they should lower that article threshold or change to a premium model. “What they decided was to go after both — they switched to a hybrid model. This just shows you that looking at models as a segmentation tool can help with growth,” Piechota said.
Case study: The Guardian
Another example he used was The Guardian, which chose to use a model that targeted readers who support the newspaper’s mission. The company believes everyone should have access to free journalism, but asks its loyal fans who can afford to contribute to do so.
“The thing is, if you want to have a certain user experience, if you want to have a selection of curated features by the editors, this is a kind of view you have to pay for. But you don’t pay for the content itself,” Piechota explained. “The idea is that content is free, but different views and different formats, you pay for.”
What the Guardian has found is that looking for people who support its mission is actually working better than a strict paywall model. “Seventy percent of their contributors come from outside the United Kingdom. So as you see, The Guardian has actually become a global brand because they found access to global customers.”
Case study: The New York Times
In another model, The New York Times segments its readers by benefits. “You can subscribe to a news product, as well as non-news products like the crosswords,” Piechota explained. “Or perhaps if you are looking for lifestyle advice, like cooking, [to connect with] a community of like-minded people who like to cook.”
For those who believe in the mission of journalism, The Times adopted a different model than The Guardian — that of asking readers to support the future of journalism through education of students. “What they say is, don’t support us, support the kids,” Piechota said. “They found 30,000 who wanted to pay extra [for this], to sponsor three million subscriptions for students.”
There are different “jobs” that people hire the media to do, and media publishers can look at how they can fulfil these different needs. “They are looking for benefits beyond knowledge, beyond information. They are starting to pay for different reasons than just to get news.”
Bundling and unbundling
“This is an amazing time for experiments,” Piechota said. He talked again about The New York Times and its incredible growth to 3.4 million digital subscribers. The important point is this was not done just through news content, it was done through many other segments such as crosswords, cooking app, etc., as well as the “Trump bump” they saw in news content.
“Increasingly, it’s non-news content that is driving this growth,” Piechota said. “They actually experiment with a pipeline of likes to see what resonates with their readers. They wanted to grow their subscriptions, and they wanted to appeal to other segments for their markets.”
This is why The Times started with the weekend section in 1976, then adding specialty sections such as sports throughout the years.
“What is interesting is that they are not only increasing the size of the bundle with these different products, but they are also actually un-bundling many of these products,” Piechota added. “You can buy the entire thing, but you can also buy individually a subscription for cooking, the crosswords, etc.”
The Daily Telegraph does something similar, with stand-alone subscriptions for access only to the Web site, or only to the app, or for the Sports Premium. “When I asked people from the Telegraph about it, they said also that their readers have a strong political affiliation, so that might prevent some people from buying the full subscription just to get the sports section. So they created a separate sports subscription.”
Piechota did a study of subscriber benefits at 128 news outlets in 30 countries. “What I saw was that when we talked about the most popular benefits at news outlets, most often people think that the biggest benefit of paid content is actually the content.” However, other benefits rated highly as well, such as features (newsletters, apps, etc.), deals (perks and gifts), and access for different users.
“I think people emphasise too much just access to content, but I think we should look at other features as well. And ask ourselves, who is that person who is going to buy the bundle? The idea of thinking a bundle is just ‘more of everything’ is not necessarily the way to do it. The question is, what is actually the need that you are going to fulfil?”
Media publishers may need to adjust the marketing mix of value proposition, channel, pricing, and promotion. This begins with the highest LTV readers (fans and heavy users), moving toward the medium LTV (pragmatists, benefit seekers), then low LTV (occasional buyers, deal seekers, etc.).
Piechota discussed the day pass model, with which publishers have seen mixed success rates. Tages Anzeiger in Switzerland, for example, sold more than 100,000 day passes in 2018. Die Welt in Germany, on the other hand, abandoned its day pass model in November 2018.
“What they found is that actually people were buying these day passes many times, but most of these people were not actually converting to subscribers,” Piechota said When Die Welt removed day passes, its subscriptions immediately jumped by 40%.
“What this means is, it depends,” Piechota concluded. “You might need to experiment, to think about these pricing models as experimental.”
Looking at what readers are willing to pay, Piechota looked at a segmentation based on visitors to 50,000 news Web sites worldwide. “I segment people into two groups — people who are direct visitors and non-direct visitors.”
There are people who visit only once per week, and others who visit two times or more per week. “These are the people you should actually chase,” he said. “What is the maximum of people who come to your Web site who behave as people who are likely subscribers. But what can you do about the rest?”
There are people who have a preference for direct channel but might not subscribe. Many of these people will buy a day pass. “But then there is the huge segment of people who don’t come to your site directly. They might be aware of your brand, but they haven’t developed a preference. They come via Facebook or different aggregators.”
For people who want to read a lot, but don’t come to the Web site directly, they may be open to buying a bundle through Facebook or Spotify, for example, Piechota said. For people who don’t have a brand preference or frequency, Piechota does not view them as a good prospect for subscriptions, but rather could be monetised just through advertising.
Future of reader revenue
Piechota used two case studies from the recent conference in Stockholm to demonstrate how to strategically look at the future of reader revenue — especially in smaller markets where it may be impossible to survive just on content/advertising revenue.
One such example is New Zealand’s Stuff, which up-sells subscribers with video streaming, broadband, electricity services, and health plans. “The market is very tiny, so even if they become the best sellers of digital subscriptions it will not be enough to sustain the customers,” Piechota said. “They said, we have this relationship with our customers, why don’t we sell more to them, instead of less? We can actually try to sell more stuff to the same people.”
Stuff was not upgrading their customers with premium content, but rather by offering other subscription-based services. “I found it a very interesting approach,” Piechota said.
Another example was the magazine publisher Dennis Publishing in the United Kingdom. “The new business model for them is to use their existing relationship with users to translate into e-commerce revenue. And so they started to sell cars to these people. They are actually delivering the cars to these people’s doors. Last year, these car sales made up 40% of their revenue.”
Publishers in many segments of media, whether newspapers, magazines, books, or others, are using transactional sales like this to increase reader revenue outside of content.
“The relationships that we create with our content, that we monetise with subscriptions, actually can be boosted by getting into transactions,” Piechota said.
The biggest challenge of e-commerce, he added, is the issue of trust. But it’s one that media publishers can build on within their relationships with readers because they have the trust of their customers.
“The money is actually in owning more and more steps in the customer journey,” Piechota said. “Not only help people to discover offers, to compare offers, but to make the booking or get the product delivered.”
When looking at what types of transactional products seem to be most profitable, Piechota said that it tends to be either very expensive products, such as real estate and cars, or things that people buy very frequently, like meals and groceries.
“So, what is actually the future of consumer revenue?” Piechota asked. When looking at household spending, the areas in which venture capitalists are investing the most heavily are areas such as housing, food, mobility, and services. “This is where the most forward-looking publishers are focusing.”
INMA: Have we exhausted the heavy user segment? Is that really only 3% of our market?
Piechota: I think those are bigger numbers, but it depends on what you do with your users. We’ve looked at 50,000 Web sites, and I believe that this segment of users that have a brand preference and frequency is bigger than 3%, but still, this is what most publishers are getting. There is one predictor for converting, and that is time spent with the publisher.
INMA: We seem to be jumping to the lower-level segments, but have we exhausted the heavy users yet?
Piechota: It depends on the publisher. Obviously, you want to focus your efforts on the most profitable subscribers with the highest LTV. But in order to grow, you need to consider other products, and many publishers need to grow their number of subscribers not only for revenue but also for PR reasons. People want to grow the numbers, and that’s why I believe they go after different segments. The biggest focus should be on heavy users, but after a few years they need to grow in other ways.
INMA: If a digital subscription publisher begins to broaden its approach to commerce, and mix these consumers in with subscribers, do you think we risk diluting and devaluing subscribers altogether?
Piechota: I think we basically need to think about our customers. They might be buying subscription access to content or support some initiative, or they might be buying a specific product. I think we are moving from the logic of the business that was about maximising the numbers of customers, to a focus on maximising the different types of things we can sell those customers. This is like a shift from a product logic to a service logic.