Go back only 10 years and digital subscriptions to news sites and apps at Schibsted amounted to pretty much nothing. In 2020, it is an anticipated NOK$1 billion business.
A decade ago, news media companies around the world applied “free” as a strategy. Free content was expected to drive frequency, which would drive interactions with ads and capture more data to monetise on in the advertising business. Users were to pay with their data, like on YouTube, Facebook, and Twitter.
However, it turned out revenue from ads alone is not a sustainable business model for news media.
A profound shift to user revenue
Over the last half-decade, I’ve witnessed a profound shift in the digital business model from being financed by ads to depending on user payments.
It’s more evident in Schibsted’s regional newspapers such as Aftenposten and SvD, but this can even be spotted in our more tabloid newspapers VG and Aftonbladet. After more than a decade with declining customer bases, Schibsted’s customer bases are once again growing — now fuelled by digital subscriptions.
Crucial to be user-centric
A strong user business forces you to be user-centric. I strongly believe being user-centric is the only way for any business to survive the digital disruption hitting every industry from media to car manufacturers, framers to hairdressers. When people’s behaviours change, the business needs to change, too.
In my experience, the accumulated historical knowledge in management groups has lost some of its value. In 2019, you need to turn to users and user data to get answers to your strategic questions and not solely rely on senior managers’ previous experience.
More digital-only than print subscribers
Today, Schibsted has more than 800,000 digital-only subscribers to our news sites and apps in Norway and Sweden. We now have more digital-only subscribers than print subscribers, and we are compensating volume decline in print with a volume increase in digital subscriptions.
But volume is only half of the way; it is by driving income that you prove yourself as a business. Income from digital news subscriptions grew by 34% from 2017 to 2018. And the growth is also impressive in absolute numbers, from about NOK$500 million to just over NOK$700 million per year.
What is almost as impressive as the digital growth is the fact we are now compensating a volume decrease in print with a price increase, keeping the top line for consumer business relatively flat.
Not bad for a business that was said to be dying!
We have reached a proof of concept. We have proven people are willing to buy digital news products.
But the churn is high — around 9% average monthly churn for our digital subscriptions. The bucket is leaking. There is a willingness to buy, but the value proposition to stay on as a customer needs to strengthen for people to keep paying.
To further fuel digital growth, we need to tackle the churn challenge. By filling the holes in the leaking bucket, we will get more out of the sales and marketing efforts we pour into the bottle. This will fuel further growth.
I see three challenges we need to overcome:
1. The paid experience needs to be superior to the free experience. For digital news subscriptions, there is seldom much money to be made in the conversion moment; all the money is in retention. We need to give users not only a reason to buy but a reason to stay and not want to go back to the free experience.
In my mind that can only be done by having a distinct difference between the free and paid experiences.
2. The news experience needs to be relevant to each and every individual. The news feeds need to be relevant to each and every individual, and also optimised for both our journalistic mission as well as for businesses, ads, and user revenue.
This simply cannot be done by human labour alone. You need to let technology — algorithms, machine learning, automation — help you.
3. We must find a way to deal with platforms. The inventors of “pay with your data” are now moving into the user revenue space, both by offering premium subscriptions to their own products (i.e. YouTube premium) and by offering publishers to get paid for the content on the platforms (i.e. Apple’s in-app purchase [IAP] and Facebook’s Instant Articles).
I believe they see what we see: Users willing to pay for great digital products. For now, at least, it is first and foremost Apple causing pain with IAPs on iOS. Apple forces Schibsted and others to use IAP for all transactions opening up content and functionality within iOS apps.
With a considerable market share in both Norway and Sweden, this causes pain. Consumer business is based on a know-your-customer strategy and, with IAP, not all customers are known to us. Actually, the customers are formally Apple customers and not customers of Aftonbladet, VG, or any of our other news brands.
UX research we have conducted tells us the users of Aftonbladet’s apps with IAP subscriptions through Apple don’t understand they are Apple customers. Therefore, they turn to Aftonbladet when they have questions or need help with their IAP subscriptions to the Aftonbladet product. Research also shows they prefer being Aftonbladet customers to Apple customers for news app products.
In addition, IAP is an expensive payment method charging 30%/15% of the transaction amounts during the customer's lifetime: 30% the first year, 15% thereafter. Credit cards by comparison typically charge less than 1%.
I believe the only reason Apple can charge such a high price is due to the monopoly situation it has in the AppStore. If Apple allowed for different payment methods for opening up digital content and functions in iOS apps, I believe the competition would drive down the price considerably.
To sum it up, Apple simply does not offer a sustainable business model for publishers. It’s not a win-win situation; it is a win-lose situation. So now dealing with platforms such as Apple, Facebook, Google, and Amazon, not only in the ads space but also in the user revenue space, becomes utterly important. It is a question of survival of the free and independent press as it limits our ability to have a sustainable business model.
User revenue is the ultimate proof of value
I’m a user revenue nerd. Having users paying for your product is, to me, the ultimate proof that you have created value. You manage to capture some of the value you created.
To further fuel digital growth, we need to have a paid experience superior to the free experience, a news experience relevant to each and every individual, and a way to deal with platforms. With fake news, deep fake, filter bubbles, radicalisation, and polarisation threatening the democracies we take for granted, news media is needed more than ever.
Our time is now. Embrace technology, love journalism.
This article is based on a presentation given at Newscamp 2019 in Augsburg, Germany, in May 2019.