As the World Congress programme reads, the Financial Times “continues to re-write the rules of print to multi-media transformations with its ubiquitous embrace of print and digital subscriptions, and now innovations in HTML5 and mobile adoption that are setting the pace for publishers worldwide.”
Undaunted courage is an integral part of an organisation’s digital and mobile strategy.
- Since the launch in June 2011, the FT Web app has had more than 3.8 million users.
- Financial Times became the first publisher to see digital subscriptions overtake print circulation — 316,000 to 286,000, respectively, as of February.
- Total paid online subscribers grew 18% year on year. Mobile drives 30% of traffic to FT.com and 15% to 20% of all new digital subscriptions.
But the story behind the scene is the one relevant to newsmedia companies.
What made the Financial Times step out of the App Store at a time when every media company in the world was rushing into the arms of Apple? And what is the lesson learned from leading innovation?
We all know the rewards are there when you do it right. But what does it take to make gutsy decisions?
I had the chance to talk to Grimshaw about that last year, when he was awarded “Best Mobile Innovation for Publishing” at the Global Mobile Awards in Barcelona, Spain.
For the Financial Times, the issue of coming up with a different strategy became urgent in January 2011, when Apple announced new subscription terms — i.e. all subscriptions have to go through the App Store, giving Apple a 30% cut of the revenues.
“We were convinced that (the new policy) wasn’t any good for us,” Grimshaw said, “and that we needed to look at something different. At that point we gave our developers the green light to try to build something in HTML5.”
What made you consider taking the risk? “The first reason was, why should we pay a 30% commission to use somebody else’s platform when we already had our own? Secondly, because we didn’t want to have an intermediary between us and our customer base. Both of those things are bad business.”
Grimshaw stressed the relationship with the customer is even more important than the commission to Apple:
“The commission is obvious, 30% less is 30% less,” he said. “The direct relationship with the customer is more complex. But if you think about it, if you don’t know who your customer is, then your ability to control churn and retention and upsell people, market other services to them, etc., disappears.
“Without that, we reckon you lose another 35%. So the result is a much less attractive business.”
Did you meet internal resistance before the launch? “There were a lot of questions asked. The main question asked, both internally and externally, was about discovery. It boiled down to: Would we just disappear from the world if we’re not in iTunes?”
Were you afraid of that? “I didn’t think that was the case. But we couldn’t prove it, since nobody else had done it.”
At that time, did you know of any other media companies that were leaning towards your strategy? “We couldn’t find any other publisher that had done anything similar. Apart from Playboy, and, frankly, we didn’t have a conversation with them.”
(The reason behind Playboy’s decision to develop a Web app was Apple’s refusal to let them do the “Full Monty” in the App Store. So the gentlemen’s magazine was forced to take another route.)
Right before the premiere, in June 2011, what were your feelings? “It was actually quite an uncomfortable feeling. There was so much public attention, and the technology was so new, that I knew there was a possibility of a very, very public embarrassment.
“We launch it, big fanfare. The whole thing falls over, and we spend several days trying to explain why we did this stupid thing …”
You took a big risk. Why do media companies rarely do that? “It’s a really good question. I think the key is a lack of confidence, actually, across the industry. Many publishers underestimate the power of their brand and the quality of their content.
“So many publishers are caught in this world where they are waiting to see what those third parties will do, and then follow them. They’re not making their own decisions. They got more assets and more good cards in their hand than they realise. And if they were to try these things, I think their readers would follow.”
What will the success of the FT Web app mean for the newspaper industry? “Everybody that follows after us is, of course, in a stronger position, because they can rely on what’s been done before.”
Another bold move was the purchase of Assanka, the technology company that developed the Web app for the Financial Times, and is now rebranded as FT Labs. Not often do newspapers buy tech companies.
About the acquisition, Grimshaw said: “This is an opportunity to bring talented and creative software engineers with proven skills in emerging Web technologies into the FT team. It will further boost our momentum in digital journalism, help us to improve the development processes, and allow us to maintain our edge in this strategically important area.”
Some key financial numbers for FT.com:
- Mobile advertising saw a 32% increase in revenue. Mobile revenue is now more than 10% of total digital advertising revenues.
- Content revenue is 45% — almost half — of its total revenue.
- Digital revenue (content + advertising) is now 30% of total revenue.
- Digital content revenue has grown 21% year-on-year and now represents 20% of total revenue.
“Our business online is mainly content,” Grimshaw said. “We make more money from subscriptions than from ads. Not that ads are declining — our ad business is growing. But the growth of subscriptions is massively outperforming ads. We think we’ll end up with a business that has about 70% revenues from content and 30% from ads.”
Do you see new revenue streams coming in? “There is an open question if we could introduce other revenue streams. We have a very valuable audience, in different ways. Could we find other services or products, which can generate revenue from that audience? It’s important we explore that.”
Grimshaw said he doesn’t want to underestimate the challenges in finding new business models.
“What is the handicap for publishers at the moment? It’s that they are trapped in their business model and finding it difficult to make it in a world where they don’t get the bulk of revenues from advertising,” he said.
“To imagine other services or revenue streams beyond that seems to be an even harder task. They are probably going to have to do that. The challenges with online advertising and the competitive environment are incredible.”
How is the Financial Times adapting to those challenges? “If you look at the Financial Times as a whole 10 years ago, 2001, over 80% of our revenues came from advertising. Now print advertising accounts for less than 40% of revenues. If you look at the digital business, we are now at a point where we are going to make more money from content than from advertising.”
In an interview with MediaWeek, Grimshaw added another perspective to what it takes for newsmedia companies to be more courageous:
“If you are to get the scale of change that you need in an organisation at times like this, then you have to have real buy-in and backing from the Board. A big part of the success that we’ve had with FT.com has been buy-in from my colleagues around the boardroom table. We have at times had to take some very difficult choices and go down some difficult roads.”