Mather Economics President Matt Lindsay presented a Webinar for INMA members Wednesday on “Monetising Audience Data: Media’s New Business Model.”
Lindsay authored a report last month on the topic (available free to INMA members), which is one of the biggest in the media industry.
The Webinar began by addressing two major shifts in news media:
- The transition from advertising revenue to audience revenue.
- The transition from print to digital.
The changeover from the importance of advertising revenue to audience revenue occurred around 2013-2014, Lindsay said, and it’s only accelerated since then. While print circulation in the United States has remained steady over a 10-year period, print advertising has gone down from US$50 billion to under US$12 billion.
At the same time, digital revenues are growing rapidly — but that revenue growth is taking a lot longer than print did.
So what does this mean for media companies? For one thing, they need to extend the print revenue stream as long as possible during the transition.
“Revenue opportunities in print are helping news media companies morph into profitable digital companies,” Lindsay told the more than 100 Webinar attendees.
To capitalise on audience revenue, companies need to migrate from a “one-size-fits-all” mentality to a model that is personalised and targeted. Predictive analytics must drive these business actions, in everything from content development to pricing models.
The factors affecting industry economics, on both advertising and audience sides, are what Lindsay calls “the three Cs” — competition, costs, and customers.
“In an advertising context, it used to be the case where newspapers had a dominant market in their geographic area. As we move to digital, that is no longer the case,” Lindsay said. On the audience side, however, that framework is a little more friendly towards news media companies.
“What media companies are really challenged by here is how to differentiate their content. People still want hyper-local news, and that is the advantage. Once you acquire a subscriber, that is a one-time acquisition; the goal then is to keep them for many years to come.”
Lindsay continued: “If you're striving to create the best user experience, you really need to try to limit advertising and provide high-quality content. A greater user experience leads to greater page views. Audience relationships are vital to this future business model.”
Focusing on target audiences with niche content topics is key, along with giving them more customer service and building the relationship. When it comes to advertising, make it engaging and targeted, with a multi-platform approach that uses first-party data.
These content economics are one of the least understood aspects of the business, Lindsay said. “When we look at user consumption patterns, what is interesting is that we see the content is consumed at all different times, on different devices, and by different audiences. Research allows us to have data that we can use to tweak where to allocate our resources.”
The presentation that accompanied his Webinar offered the following content economics objectives:
- Key performance indicators at article, author, and content level.
- Scoring system with goals to easily evaluate progress over time.
- Better allocate resources within the newsroom.
- Inform the editorial team about audience and advertising performance.
- Article publication schedule recommendation.
In some of his research with clients, data shows the subjects which garner the most page views and advertising results — revealing the opportunities for new content. For example, with one European media company, sports was the most preferred content from engaged users; however, there might be an oversupply of articles in that genre.
Conversely, the second-most preferred content was kaernten (the southern Austrian region of Carinthia) — which indicates an undersupply of new articles.
Lindsay urged news media companies to pay attention to the long tail of digital and audience acquisition.
“Anything to do with a subscriber base takes a long time to turn the needle. The print tail can be extended considerably by lowering your attrition rate. The leading practitioners that we see in the industry are extending their subscriber base as long as they can, to really give them that runway for other revenue models to build.”
He offered several methods with which to do this:
- Targeted subscription pricing with market-based pricing (MBP), which manages profitability on a subscriber level. This matches pricing to a customer’s individual value of service, and calculates operating margins for each account.
- Paying attention to the customer lifetime value.
- Giving long-term offers to subscribers. The drop rate is very sensitive to price increases after an initial special offer.
- Having intelligent paywalls. If people pay to read articles, they tend to be much more engaged.
- Predicting churn through research and data. The customer’s value of service changes over time, and each subscriber should be analysed at key points in their lifecycle.
- Building relationships with your audience. The pricing model should be customised by client engagement.
“The key is that we have the ability to manage our customers on a one-to-one basis; other industries don’t have this,” Lindsay said.
He shared the success of the long-term subscription model, which offered a set, ongoing price for a one-to-three-year subscription commitment. The key aspects of the programme were:
- The publisher commits to a promotional price for the duration of the offer.
- The customer commits to retaining an active subscription for the duration of the offer.
- Monthly billing uses recurring credit card or auto-draft payments.
- The offer length is one, two, or three years.
- The discounted price is the same for all terms.
“As this client moved away from monthly offers to these long-term offers, what was dramatic was that the number of years of subscription life was almost doubled,” Lindsay reported.
The subscribers would be let out of the contract for certain situations such as job loss, moving to another country, death — or even that the news product was really, really not what they hoped for. Even so, 92% of these subscribers made it to the end of the contract.
Lindsay responded to an audience question about the effectiveness of long-term subscriptions with enthusiasm for the model: “The short-term, price reduction model casts a wide net. It’s a way to get a lot of new subscribers — but it’s not very effective at retaining them.”
Long-term offers also lead to a dramatic decrease in stops, by -48%. “They are actually up in print circulation year after year — which is actually quite striking in our current atmosphere of print reduction.”
When churn doesn’t have to do with pricing, Lindsay said, it is often due to friction in the customer relationship. “If you can move away from that ‘one-price-fits-all’ model, you can actually increase the value of the relationship."
Data provides a way to predict, very well, who is likely to stop. Churn modeling provides customer patterns, and deviations from these patterns are the key indicators of a likeliness to churn. “Knowing who is likely to churn is the first step,” Lindsay said, sharing that customers who subscribed through a social media channel had the highest likelihood of churning.
Lindsay shared a case study from Newsday, which looked at the incentives given to subscribers pre-expiration, aimed at reducing churn with at-risk accounts.
Three different incentives were sent to these customers: a portable smart device charger, a $10 Target gift card, and a personalised thank-you card. The simple thank-you card (which was also the least expensive at $1 total compared to the $18 charger and $11 gift card), saw a much higher initial retention rate. It also had a higher long-term effect on the high-churn probability customers.
Lindsay used the 80/20 rule to illustrate the customers that this type of data can really target: those who just outside that top tier of loyal subscribers. “If you can get people who aren’t quite in that 20% to move there, you increase your base.... We find that our clients are over-invested in acquisition, and under-invested in retention.”
It’s critical for the media industry to share best practices and knowledge, he said: “I’m really bullish on the industry — I think there are lots of great opportunities out there.”