Hi! This is Readers First, a monthly newsletter for INMA members on reader revenue innovation. I’m Researcher-In-Residence at INMA.
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1. SOCIAL MEDIA. What is your backup plan for the end of the Facebook News Feed?
The retreat from social broadcasting: The News Feed on Facebook that drives, per Chartbeat, about 13% of visits to news Web sites worldwide is no longer the company’s strategic focus. It is going to be replaced with private messaging and groups. Will WhatsApp and Messenger become the new key channels for acquisition of news readers?
In the news: In a 3,200-word Facebook note published on March 6, CEO Mark Zuckerberg outlined “privacy-focused” future of his social platforms: Facebook, WhatsApp, Messenger and Instagram. Last week, changes in the top management followed.
- The vision: Zuckerberg wrote that he sees private messaging, ephemeral (disappearing) stories, and small groups the fastest growing areas of online communication, and that he planned to shift all Facebook platforms there over the next few years.
- Messengers-first: Zuckerberg expects Messenger and WhatsApp to become the main ways to communicate on its network, and he wants to integrate infrastructure to allow sending messages across all the apps.
- Change in a business model: Zuckerberg plans to build payments, e-commerce, and services upon the interaction tools, suggesting the shift towards a business model of Asian all-in-one apps such as WeChat. Notably, 81% of revenue of Tencent, the owner of WeChat, came last year from transactions. Compare it to Facebook: 98% of its revenue in 2018 came from advertising.
- Unclear future of advertising on Facebook: Zuckerberg did not elaborate much about ads. It’s a surprise, as it’s his core business and it’s based on public feeds on Facebook and Instagram. The encryption of the contents of messages and Group posts would likely reduce the amount of data Facebook collects on users and limit its targeting capabilities. Note: It would continue to collect meta-data of messages and know the users’ social graph, and it could derive interests from the graph, services used, etc.
Why the change? Some believe it’s smoke and mirrors just for PR, but for some, it’s a fundamental shift of the business model. Others point out policing user generated content from 2.3 billion people got too expensive for Facebook: politically and businesswise. Hence the pivot — having encrypted “fake news” and locked terrorist’s live streams in private groups, it hopes perhaps to escape responsibility and scrutiny. Merging the platforms’ infrastructure might prevent the competition watchdogs from breaking up Facebook.
What does it all mean to news publishers who rely on Facebook for reader acquisition and engagement?
- The ad revenue-milking interim period: As the only way for Facebook to fund the transformation journey is with ads, one may expect the further decrease in the organic reach of Page posts. For Pages with more than 100,000 fans, according to Locowise, this reach has already fell down to 3.5% by January 2019; 26% of Facebook Pages advertised to increase the reach of their posts, and about one-third of all reach the Page posts got was paid.
- The demise of public feeds: In his note, Zuckerberg did not explain what was going to happen to public feeds that were central to the experience on Facebook and Instagram. Are News Feed and Instagram Feed going to fade slowly away, as cash cows in a low-maintenance mode? Are they one day going to be relegated to secondary screens such as the Moments feed on WeChat?
- The further rise of messenger-referred traffic: People switch to messaging apps: per Chartbeat, the “dark social” visits to news sites worldwide grew to 17% share in 2018. These visits most likely came from links shared by users and not by publishers, as few of them have built messenger bots or groups with a substantial follower base.
- The risks of groups: Groups offer high visibility of posts and engagement, for example on Facebook, but require time and effort in moderation. As Group administrators or contributors, editors build communities that in the end fully belong to Facebook. The company can deprioritise or close Groups at any time, as it did in the past with other features.
- Limits to the virality: To curb the distribution of disinformation and illegal content, WhatsApp and Messenger imposed limits on broadcasting messages to the followers and the number of forwards allowed for each message they get.
For data on the digital media landscape in 2019: Check the latest edition of the Hootsuite’s report “The Global State of Digital”.
2. CASE STUDY. Look how this business news publisher in India engages readers with news alerts on WhatsApp.
3. PRICING MODELS. Is it a good idea to bundle a news subscription with access to other digital services?
From letters to the editor: Veronika Solum from Schibsted Media asked: “What does motivate news publishers to bundle their news products with other digital services, such as other newspapers, music or video streaming?”
Examples: Many news publishers have been bundling their news subscription with other products, for example:
- Music content: A few years ago, The Times of London and the New York Times offered joint subscriptions with Spotify. In the United States, the music service is offering now a bundle with Hulu, a video streaming service.
- TV content: Germany’s Bild included the current and archived video clips from the soccer league in its paid package.
- News content: Poland’s Gazeta Wyborcza offered a joint subscription with The Wall Street Journal for an extra fee, while The Times of London offered a free access to the Journal to all its UK subscribers.
- Telecom service: Brazil’s Zero Hora offers its subscription as an add-on service to the telecom subscribers of Clara, a mobile operator, and Net, a fixed-line provider.
- Discounts: Argentina’s Clarin runs a club 365 that bundles discounts, competitions, and occasional free services for subscribers of its newspapers and other businesses.
Good reasons to bundle: The deals that publishers strike might have different business objectives and, therefore, different measures of success:
- Maximising profit: Bundling can save costs of promotion and sales of goods by stapling them together. It can also bring more revenue as bundling solves the problem of pricing to different tastes and value people associate with products (as explained in the chart).
- Subsidising less popular but valuable products: Without bundling, many less popular services could not actually survive as they could never find enough customers willing to pay the premium required to cover the full cost of the service.
- Acquisition of new customers: User bases and sales channels of different products might not overlap. For example, a newspaper may find a younger audience when bundling with a music service, and the music service might acquire an older readership of the newspaper.
- Retention of customers: Creators of bundles profit from engagement spread among bundled products and therefore enjoy a stronger lock-in of customers. You may drop your Spotify subscription, but how can you live without your beloved Times?
- Upgrading customers: For example, a general interest newspaper wants to increase lifetime value of its business readers, but it cannot justify building a business vertical. Bundling with a business publication, it can charge more without much of investment. The business publisher is happy, too, as it cheaply acquires new customers who are qualified leads as heavy news users.
For some theory on bundling, read this classic article from “Harvard Business Review”.
4. CULTURE CHANGE. The internal newsletter that made the Guardian’s newsroom fall in love with data.
It’s around 8:00 a.m. in London, when 1,000 editors, journalists, marketers, ad reps get this e-mail: “Thursday, 7th March: XX uniques, XX page views.” Of all data analytics tools the Guardian has built and used, the daily morning newsletter is perhaps the most important.
Democratising data: A hack day in 2011 organised by Chris Moran, then a SEO editor, led to the creation of Ophan, an internal analytics software that processes more than 2 billion data points and features real-time dashboards for 1,000 employees. Ophan is the backbone of audience analytics at the Guardian.
Data culture: Two weeks ago, I watched Chris speaking at a Media24 annual event in Cape Town, South Africa, and then spent a day investigating his thoughtful approach to the use of audience data in the newsroom. The principles?
- Responsibility: “Where data clashes with editorial principle, editorial principle wins.”
- Access: “Data cannot be only for senior executives; it belongs to the newsroom and it needs to be connected to action.”
- Decision-making: “Editing and writing are subjective human activities. Data can never give you a definite answer to editorial questions, and sometimes it’s better to ignore the data.”
- Learning: “But to ignore, you first have to look at it. And ignoring consistent data over a long period of time is unacceptable.”
Data literacy: Hanging a big screen in the newsroom with a digital dashboard is easy. Chris describes what it takes to actually make people understand and use the data from the dashboard: Every morning, 1,000 people at the Guardian get an e-mail with a recap of the yesterday’s online readership. It’s written by one of audience editors who oversee SEO, social media, etc. It’s not a list of the best-read articles that matters most. It’s the analysis, added context, conclusions, and advice.
The insight: “I learned about our audience by writing this e-mail every day for the first several years,” Chris said. At first, it took up to three hours to prepare. Now, it’s just an hour. Is it worth the time and effort? “People got into a habit of reading and discussing the data every morning. It’s the e-mail that changed the culture.”
5. LETTER FROM THE ROAD: How Indian publishers get ready for the shift to reader revenue in a few years.
How it begins: In a few years, India can become the world’s biggest market for online news subscriptions. For years, publishers here could not imagine a shift to digital — nor reader revenue. In 2018, the revenue from print advertising could be all time high, but, according to WAN-IFRA, the print newspapers’ circulation suddenly dropped by 20% year-on-year.
The future is now: I visited India many times over the past decade. It was always: “Print! Print! Print!” For the first time this March in Hyderabad and Delhi, I felt a change of the climate despite surprisingly mild temperatures outdoors.
- In 2018, 100 million Indians got onto the Web for the first time, and half a billion people used the Internet at the end of the year (in a country of 1.3 billion). More than a billion have already subscribed to a mobile, and nearly half of them used a smartphone.
- Hotstar, the most popular video streaming service in India, reported it had amassed 145 million monthly active users. Gaana, the most popular music service, had 80 million users. It matters, as the Reuters Institute observed that in countries, in which more people pay for online video and audio, more people for online news, too.
- Quietly, India has become the second biggest market for Amazon Prime, after the United States. It has 10 million paying members there and was confident enough to double the price in 2018 to about US$15 per year. Not bad for the market where print newspapers are almost free.
The roadmap to reader revenue: In a series of workshops, organised by the INMA regional board, we discussed and ideated with more than a 100 news executives what they can do to be ready for reader revenue in two to three years:
- Focus the newsroom on driving and engaging direct, habitual readership online that you can best monetise in many ways — be it advertising today, or subscriptions and e-commerce tomorrow.
- Register and log in users so you can collect and analyse data to inform editorial, marketing, and product strategies.
- Differentiate brand and content from free alternatives by brand advertising and adjusting product to the loyal users.
- Improve your marketing and sales organisation to allow the value nurturing across the purchase funnel — from acquisition to retention.
- Improve your technology organisation to allow customer-centric and agile methods of product development and management.
About this newsletter
This newsletter is written by Grzegorz (Greg) Piechota, Researcher-In-Residence at INMA, based in Oxford, England. Every month in this space, I share results of my original research, notes from visits to digital subscription leaders, reflections on talks at conferences, and my favourite readings. Previous editions are archived online:
- “No. 6: What if 50% from Apple is more than publishers get from Google?”
- “No. 5: How to monetise the 98% of readers who don’t subscribe”
- “No. 4: What’s wrong with subscription product managers”
- “No. 3: How New York Times is disrupting magazines”
- “No. 2: Driving Loyalty in the Age of Social Networks”
- “No. 1: What Paywall Myths and the tale of the two Posts say about reader revenue”
This newsletter is a public face of a year-long reader revenue and media subscriptions initiative by INMA, outlined here. E-mail me at email@example.com with thoughts, suggestions, and questions. Sign up to our Slack channel.